Debt forgiveness: What is it?

Government has proposed introducing a debt forgiveness programme specifically aimed at retrenched workers. This follows concerns by the Department of Trade and Industry (DTI) over reckless lending by credit providers.  

In a statement released by parliament on Friday, it noted that the DTI is seeking to implement changes to the National Credit Act (NCA) in order to combat the ongoing issue of reckless lending. “We have an Act. We have laws, otherwise why make laws? I am distressed to hear that reckless lending is continuing,” said chairperson of the Portfolio Committee on Trade and Industry Joanmariae Fubbs.

The Committee has recommended that “a new category of crimes be included in the Act, one that outlaws repeated or gross reckless lenders.” In addition, Fubbs highlighted the urgent need to introduce measures regarding debt forgiveness.

Debt forgiveness

“The Committee expressed concern about the time it takes to finalise non-debt rearrangement matters where there are delays outside the NCT’s (National Consumer Tribunal) control. In 41 pending matters filed by the NCR (National Credit Regulator), where there were postponements, condonation applications or matters held over due to High Court Application, the NCT stated that the average turnaround period was 256 days. The Committee were further concerned about the amount of non-debt rearrangement matters declined due to insufficient information,” stated parliament.

It added: “The Committee welcomed the introduction of motion courts and change in procedures for debt re-arrangement applications.”

This is not the first time that calls have been made to help the over indebted. Similar calls were made earlier in May when the NCR briefed the Committee. At the time, Adrian Williams of the African National Congress (ANC) suggested that the NCR consider the implementation of a debt forgiveness programme to assist lower income groups.

A report revealed that excess funds from the likes of the Unemployment Insurance Fund (UIF) and other bodies that have a surplus of income could be used to fund the debt forgiveness programme. It has been emphasised that this programme, if implemented, would only be available to those who have been retrenched, and are unable to service their debts.

Concerns over reckless lending

According to a statement released by parliament, the Portfolio Committee on Trade and Industry has noted “that the legal impediments preventing the NCR from being able to enforce its mandate should urgently be addressed.”

Reports to the Committee claim that the NCT faced financial challenges in the 2015/2016 financial year. “Challenges included a rapid increase in caseloads, case management implementation issues, and procedural steps by parties that are outside of the NCT’s control, which are increasing turnaround times on finalisation of cases.  The NCT received 19 097 cases in 2015/16 financial year. This is a 99.16% increase from 9 589 cases received during 2014/15. Over a three year period, the NCT’s caseload has almost quadrupled, while financial resources increased by 12.93% on average year-on-year.”

To help reduce the burden faced by the NCT, a recommendation has been made that the NCR be able to impose fines on credit providers following investigations that find behaviour that breaches the NCA. A report stated that the proposed changes will enable the NCR to implement a debt relief programme, while also carrying out investigations.

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