Benefits of the Introduction of New Rules for Credit Providers
Overview
With most South Africans spending an average of about 76% of their monthly salary to pay off debt, it’s becoming more evident that too many consumers are over-indebted.
What has caused this?
Numerous lenders have been extending credit to consumers without checking their affordability status. They have also granted credit without checking how much credit consumers already have.
Due to the large number or over-indebted consumers in South Africa, the National Credit Regulator (NCR) has introduced a number of new rules for credit providers.
Tell me more about the introduction of new rules for credit providers?
The National Credit regulator (NCR) has introduced affordability guidelines to be followed by credit providers. This is as a result of the severity of over-indebtedness in South Africa.
The National Credit Act was implemented to suppress reckless lending and curb over-indebtedness. The Act stipulates that an affordability assessment has to be carried out by a credit provider before the issuing of credit to a consumer.
“What the NCR wants to do is exercise full regulatory authority and oversight over the commitments made by credit providers to combat over-indebtedness and to lend responsibly,” says Lesiba Meshapa, Company Secretary of the NCR.
Legitimate lenders will never grant loans to individuals who are over-indebted.
Documentation that must be provided:
- Latest 3 bank statements
- Valid identity documentation
What are the benefits of the introduction of new rules for credit providers?
- There is a reduced chance of reckless lending
- Credit providers have a clear idea of how much consumers can afford to repay
- It will curb already over-indebted individuals from applying for further credit
- Credit providers must also be registered no matter how much credit they provide, so consumers are protected from unscrupulous lenders
- The National Credit Regulator has a clear idea of the number of legitimate lenders in the country
