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National Credit Act

To promote a fair and non-discriminatory marketplace for access to consumer credit

To promote responsible credit granting and use and for that purpose to prohibit reckless credit granting;

To provide for debt re-organisation in cases of over-indebtedness

South Africa vs PIIGS vs BRIC

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Who is the NCR

CEO

RegistrationsComplaints

& Call Centre

Investigations&

Enforcement

Consumer awareness & education

Credit Bureau& Research

Statistics& Research

Debt Counselling monitoring &support

100 staff members

Department of Trade & Industry

Board ofDirectors

Departments of Finance, Housing &Social Development

Parliament of SANCR, Est. By Act of Parliament: NCA,34 of 2005

Support Services:IT, HR & Finance

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Statistical overview of the consumer credit market in

South Africa

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Consumer Credit Market in South Africa

Credit Providers 18.4 millionCredit Active Consumers

2,027Debt Counsellors

R1.2 trillionconsumer credit

consumer credit -35 million outstanding

accounts

Credit Providers = 4,755Branches = 36,000

Credit Bureaus = 11

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Statistical overview of the consumer credit market in South Africa

Observations based on statistics received from Credit Bureaus & Credit Providers (including banks)

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Credit Bureau Statistics Debt stress & defaults

Credit performance of 18.8 million consumers, as reported by credit providers to bureaus. Covers both credit agreements and all other forms of debt or financial obligations

Ongoing increase in consumers with impaired records, from 36% in Jun’07 to 47% in Jun’11.

The number of consumers with impaired records increased by 2.7 million since June 2007.

Credit-active consumers have increased from 16.8 million in June 2007 to 18.8 million in June 2011.

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Credit standing of consumers

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Credit standing of accounts

Credit standing of consumers

Credit standing of consumers – June 2011 The percentage of consumers

with impaired records increased to 46.7%, comprising 18.5% of consumers with three months or more in arrears, 13.9% of consumers with adverse listings and 14.3% of consumers with judgments and administration orders.

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Credit Granted vs. Debtors Book

Decline in total credit granted noticeable until 2nd quarter of 2009; Although external events had little primary impact on SA, it caused a

major contraction in credit. Quarterly credit granted dropped from R102 bn to R50 bn;

NCA and Debt counselling played a major stabilizing role; For every case resolved by DCs, at least 4 informally resolved by bank. 2nd contraction expected in 1st and 2nd quarter of 2012

New credit granted –percentage distribution

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Performance of the debtors book that is in “current” based on the rand values

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Credit granted per income category (rand values)

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DEBT STRESS

Consumer credit impact all areas of economic life i.e. purchase of houses, cars, appliances … etc. Economies are driven by credit.

Any Contraction in credit therefore, will have a huge impact: drop in demand; drop in production; losses in job & commissions … property prices will fall;

This then feeds through into debt stress … with more houses on market, 2nd round of fall-out, with huge impact on financial system & society

Debt counselling was designed to mediate this process … to create a “safety net”, a mechanism to resolve all cases that are possible of resolution;

8.8 million consumers with impaired records, but only estimated 110,000 active debt review cases.

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Importance & role of debt counselling Role of debt counselling, in the context of the lack of appropriate personal

insolvency mechanisms in SA. o SA does not have appropriate “personal insolvency mechanisms”. Countries like US, UK and

most of EU have range of different mechanisms to deal with personal insolvency. The mechanisms in SA are outdated and ineffective.

o As result, when debt stress occurs there is no effective mechanisms to resolve the issues, or for creating a “settlement” in which the obligations of the consumer and the demands of different credit providers are reconciled.

o Conflicting Court Judgments have caused confusion leading to uncertainty amongst Magistrates, DCs and CPs. Impact of SCA Judgment may have negative social consequences as CPs take a hard stance. Constitutional Court Appeal in SATS and Collet matter dismissed. Amendments may be only solution if Banks embark on massive termination drives.

The implications for householdso Without mechanisms to address debt stress, significant negative social consequence as

there would be no mechanism to resolve a personal financial crisis and enable an individual to get another chance.

o Without relief, the household income is permanently reduced through debt payments. Basic household needs are not met and social welfare receipts are diverted to debt servicing. It impacts on school fees not being paid, arrears on municipal service payments and a multitude of related areas.

o Increase in fuel, electricity and basic commodity prices will see greater pressure on households to sustain debt payments.

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Granted Court Orders

31,585 court orders granted up to August 2011; A further 1900 were granted in September 2011 taking figure to 33,485; Numbers may be understated due to delays in updating status or not

updating at all; Improvements noticeable in Gauteng and Western Cape; Eastern Cape, KZN and Free State appear to have the least problems.

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Debt Counsellingcurrent position

2027 debt counsellors registered, five accredited payment distribution agencies.

NCR - extensive monitoring + support mechanisms + investigations & enforcement

276,601 + applications cumulatively, growing at 6,000 pm; Monthly distributions to creditors now approx R235 million for approximately 65 000 consumers.

Cumulative R5.4 billion to CPs. 90% of payment received by banks come from accredited PDAs.

Despite challenges, debt counselling already played a huge role in mediating between debt stressed consumers and their credit providers but challenges remain.

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Achievements

Unqualified Audit Reports since inception

Contact Centre: Unanswered call rate <10%

2347 complaints received in FY 2009-10 (10,570 complaints since inception): 83% resolved within 90 days; FY 2010-11(April – Sept. ‘11): 991 complaints: 71% resolved within 90 days; balance still within 90 days;

Refunds to consumers = R31milliion

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Achievements (Cont.)

INVESTIGATIONS:

“Bliekriegs” on cards, pins; Pension Payout Points in Eastern Cape (Partnership: NCR, SAPS, SA Social Security Agency, E/C Commercial Crime Unit);

- The purpose of the campaign was to investigate operations of unscrupulous credit providers.

- A number of “Skoppers” were arrested.

- Police also found the suspects in possession of pension cards, ID books and bank cards.

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Achievements (Cont.)

INVESTIGATIONS:

66 investigations concluded in the FY 2009/10; Nature of investigations:

- Unlawful charges- ATM Loans- Housing Schemes- Terminations (debt counselling)

Court Matters: 50 court cases + 24 criminal cases

Referrals to the Tribunal = 29 (99% success rate)

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Achievements (Cont.)

INVESTIGATIONS:

55 Compliance Notices (1st CN issued to one of biggest Credit Bureau)

140 Instructional letters

Court Matters: 50 court cases + 24 criminal cases

Referrals to the Tribunal = 29 (99% success rate)

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Consumer education

Summary of Act & short brochures on different aspects… in all official languages & available on www.ncr.org.za

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Consumer Education

Since its inception the NCR has consistently made a concerted effort to educate and inform the South African public about the NCA and the NCR’s role and responsibilities as per its mandate from the Act.

We fund all our education programmes. We also partner with all the 9 Provincial Consumer Affairs Offices .

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Consumer Education

Resources File ( Presentations; Material on financial literacy; Broachers; Consumer Booklet; Radio Script; NCA & Regulations )

Consumer Booklet

NCR Website

Billboard

Print Media (Editorial and advertisements), broadcast (interviews with NCR’s spokespersons) and electronic media editorials.

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Consumer Education

Communication Tools:

o Seminars for professional bodies;

o Capacity Building Workshops

o Consumer Education Workshops

o Road shows

o Exhibitions

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Consumer Education

The Education programmes are targeted at all South African consumers through:

o Consumer Advice Centers; o Labour Unions, o Non-Governmental Organisations (NGOs);o Government Departments/Institutions;o Provincial Consumer Protection Offices;o Employers/Private sectorso Traditional Authorities and o Other civic bodies.

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Consumer Education

Communication Campaigns:

o Spend and Borrow Wisely (November/December)

o Consumer Month (15 March: International Consumer Rights Day)

o Youth Month (16 June)

o Women’s Month (09 August)

o Worker’s Month (1 May)

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Consumer Education

BASA Campaign with NCR:

o In an unprecedented move to deal effectively with consumer debt related challenges, the Banking Association of South Africa (BASA), the National Credit Regulator (NCR), and the Debt Counselling Association of South Africa (DCASA) launched a joint national consumer awareness campaign in 2010.

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Consumer Education

o The joint campaign by key stakeholders in South Africa’s banking and credit regulatory environments was a first for the industry and aimed at addressing adverse consumer behaviour trends as well as promote a better understanding of debt counselling, including expected conduct by consumers

o The campaign, was funded by SA leading banks; ABSA, African Bank, Capitec, First Rand, Nedbank and Standard Bank conveyed key messages through a national advertising and publicity campaign, with very specific calls to action:

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Consumer Education

South African Savings Institute joint campaigns with the NCR:

Targeted students in all South African tertiary institutions’ campuses.

The aim of the campaign is to create awareness amongst tertiary students on their rights and responsibilities when taking up credit, debt management and the importance of saving.

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Consumer Education

Since inception - end of September 2011

o Number of workshops – 2 057 Audited Numbers)

o Number of participants – 241 580 (Audited Numbers)

o Hits on website – 979 795

o Total Advertising Value Equivalence (AVE) - R393 million

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Disabled Community Programme

The Governments Social Grant System also caters for people with disabilities who are unemployed. This also makes them potential victims to unscrupulous micro lenders that are targeted by the Blitzkrieg. Those who are economically active also find themselves marginalized from some of the education programmes that we undertake

Therefore the NCR has in the past made efforts to develop special educational programmes that were tailor-made for hard at hearing (deaf) and blind people.

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Disabled Community Programme

Train the Trainer Programme:

The rationale was for trained participants to train their respective constituencies on the NCA and role of the NCR

Blind Programme:

o National Council for the Blind (NCB) was engaged in mobilizing participants from all nine provinces of South Africa.

o NCA Consumer Booklet was translated into the brail language.

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Disabled Community Programme

Hard at Hearing (Deaf) Programme:

o The Deaf Federation of South Africa mobilised participants in all 9 provinces of South African.

o Professional sign language interpreters were secured to assist NCR consumer education officers during the workshops.

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Consumer Education

Soul City Television Series:

The NCR will for the first time explore new communication channels through

the above mentioned television series. It is anticipated that by partnering with

an edu-entertainment like Soul City will derive the following benefits:

o The series as one of the most watched television programmes ( more than 50% of the total TV viewers watch Soul City) in the country will role-model action that will educate and assist viewers about their rights and responsibilities as consumers when it comes to credit matters and also will highlight the roles and responsibilities of the NCR within the credit market and simultaneously educate the viewers about the NCA.

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Consumer Education

How do we evaluate Education Initiatives/Programme?

o Workshop Evaluation Questionnaire for Capacity Building Workshops Evaluation Sheets are issued at the end of the workshop to measure effectiveness of the content and presenters.

 o Through the call center we are also able to determine the

effectiveness of our communication strategies by asking the calling public how they got to know about the NCR for example, Electronic: Print Media, word of mouth or attended an NCR run workshop.

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Consumer Education

Impact Assessment:

o Since 2008, the NCR has commissioned an impact assessment study on an annual basis to evaluate the effectiveness of Awareness and Education Campaigns and performance of the implementation of the NCA. The 2010 major findings were:• The NCA and NCR’s awareness levels are at 70% (54%:2008)and

73% (51%:2008) respectively.• Awareness levels among low-income group remains relatively low.• There is limited understanding of credit terminology.• There is limited awareness of consumer protection avenues,

including debt counselling.• NCR staff are perceived as being helpful and responsive.• Media: Effective in use of media in increasing public awareness

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ACHIEVEMENTS

Learnership Programme: 10 learners commenced work with NCR

Knowledge Sharing: hosted delegates from SADC (Botswana, Namibia, Lesotho, Uganda, Kenya), Europe, and Asia

Participation in the OECD Conference – “Financial Education for All”

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CHALLENGES

”Newness” of the Act: Interpretation Challenges; tested in the courts; comments by Judiciary (Collet’s Case)

NCR Capacity: skills, etc (Recruitment)

Payment Distribution Agents’ (PDA) interest

National Register of Credit Agreements

Debt Counselling: Skills, DC Fees

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Concluding Remarks

Critical to get majority subscription to Codes by DCs and CPs. Amendments will take years. A functional system is necessary to ensure:-

An effective mechanism through which consumers can be rehabilitated;

Speedy resolution of debt review matters; Speedy rehabilitation of consumers enabling re-entry into credit

market; On-going collaboration between key stakeholders that will allow

NCR to focus purely on regulation and enforcement; Consumers continue to live normal life by being responsible and

debt conscious; Credit Providers to consider impact of reckless credit thus creating

equity in the credit market.

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Thank You !www.ncr.org.za