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NATIONAL CREDIT REGULATOR. Presentation to the Portfolio Committee on Trade & Industry African Bank Crisis Nomsa Motshegare Chief Executive Officer. The structure of financial regulation in South Africa. Prudential regulation Safety & soundness of financial system & banks - PowerPoint PPT Presentation
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Presentation to the Portfolio Committee on Trade & Industry
African Bank Crisis
Nomsa Motshegare
Chief Executive Officer
NATIONAL CREDIT REGULATOR
The structure of financial regulation in South Africa
Prudential regulation
Safety & soundness of financial system & banks
Financial stability of banks
Threats of systemic risk to the financial system & banks
No market conduct practices
South African Reserve Bank
Consumer credit Regulation
Market conduct practices of banks
Consumer protection
No financial stability of banks
No safety & soundness of financial system
National Credit Regulator
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Trends in credit growth over time
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Concept of reckless lending
Lack of affordability assessment
Income disclosed not verified
Expenses not verified
Credit bureau reports not obtained
Affordability assessment done, but
Consumer does not understand rights, obligations & cost of credit
Credit granted & over-indebted consumer
Remedies available
Court can set aside or suspend contract
Prohibited conduct (not reckless lending) declared by National Consumer Tribunal & administrative fine
Compliance notice by National Credit Regulator
Removal of credit bureau listings, rescission of judgments
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Africa Bank reckless lending investigation
The African Bank reckless lending investigation
Complaints received from consumers & investigation initiated by the NCR;
669 reckless loans; 651 loans by KZN Dundee branch; 48 loans by 25 other branches (Mabopane, Germiston, Rustenburg,
Umtata, Cape Town, Durban, Thohoyandou, Gugulethu, Orlando, Pretoria, Upington, Carletonville, Klerksdorp, Mafikeng, Johannesburg, Idutywa, Randfontein, Witbank (Arras Street), Witbank (Klipfontein), Carletonville, Umtata, Nqutu, Polokwane, Tsolo and Tzaneen);
South African Reserve Bank formally notified of the findings from the investigation in 2012.
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Africa Bank reckless lending investigation
The African Bank reckless lending investigation
African Bank explained that loan origination system manipulated by agents in collaboration consumers;
NCR did not accept the explanation & requested African Bank to enter into a consent order to be confirmed by Tribunal;
Consent order proposed a fine of R300 million and corrective measures to assist the affected consumers (writing off of loans, rescission of judgments, clearing of credit bureau listings);
African Bank declined to enter into consent & NCR decided to refer them to the Tribunal;
NCR notified the South African Reserve Bank in 2012.
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Africa Bank reckless lending investigation
The African Bank reckless lending investigation
African Bank approached the NCR to negotiate a settlement of the matter;
Settlement reached with African Bank agreeing to pay a fine of R20 million & effect corrective measures;
NCR considered factors in section 151 of the National Credit Act when agreeing to the settlement.
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NCR Study on Affordability assessment weaknesses
Study identified the following weaknesses:
Lack of verification of income disclosed by consumers;
Under-disclosure of living expenses by consumers in credit applications;
No credit bureau reports; Delay in granting credit after
obtaining consumer credit reports; Lending to the maximum of the
consumer’s available disposable income;
Not all loans recorded at credit bureaus (voluntary system of credit reporting system).
Affordability assessment regulations
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Enforcement Action
Raids in Marikana, N/W Province:
2012:16 credit providers raided: reckless lending, retention of bank cards, pin codes, id books,excessive fees & int;
Arrests made, criminal cases opened & referrals to the Tribunal;
2014: Above + 15 credit providers in Rustenburg area raided
2014 raids: 50% that were raided in 2012 not operating due to strikes + cancellation of registration by the Tribunal;
Absence of retention of bank cards, pins & Id docs;
Files for Rustenburg raids being assessed;
Similar raids conducted in W/Cape, Limpopo, Gauteng, Mpumalanga, KZN Provinces in past 2 years.
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Enforcement Action - 2014
13 compliance notices issued : includes those issued for unlawful adverts;
8 referrals to the Tribunal
Arrests made, criminal cases opened & referrals to the Tribunal;
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Going Forward
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To work with the World Bank to develop an “early warning system” in the credit market for non-bank entities;
Monthly statistical reports to be submitted to the NCR: to detect unforeseen market events;
National Credit Amendment Act, 19 2014: NCR to refer cases to the Tribunal for reckless lending; credit life to be capped;
Affordability assessment audits to be conducted across different types of credit providers;
NCR to work with credit providers to assist in complying with affordability assessment regulations.
Continuously enhance co-ordination between the NCR and Registrar on Banks.
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Thank You!
www.ncr.org.za