focus
Marikana: however much or little over-indebtedness
contributed, last year’s tragedy focused attention on lenders.
One of the lessons to
come out of the Marikana
incident is the widespread
abuse of garnishee orders
by certain credit providers.
Sokutu says that credit providers need to put customers at the
centre of their lending practices to ensure that customers can afford
to repay their loans within the contractual term. ‘We are sensitised to
the economic conditions of our customers, and where our customers
face hardship, such as some of our mining customers, we assist to
restructure loans to help them through their financial hardships,’
he adds.
The engagements between The Banking Association of South
Africa (The Banking Association) and National Treasury are a good
sign that the industry is interested in eliminating unsavory elements
in unsecured lending.
The Banking Association Managing Director Cas Coovadia has
previously stated that banks are working on a draft Code of Good
Practice on Unsecured Lending. Coovadia says this would put a stop
to certain providers offering unsecured loans for the sake of getting
more profit from the interest, rather than a cheaper loan relevant for
what needs to be financed.
Agreements between The Banking Association and National
Treasury have also called for the review of loan affordability
assessments, relief measures for distressed borrowers, limiting
garnishee orders and reviewing the use of debit orders.
The Banking Association, the NCR and National Treasury have
agreed to devise a standard to measure affordability. This standard
of affordability could possibly be incorporated into regulations
aimed at dealing with over-indebtedness.
With regard to providing relief to distressed borrowers, The
Banking Association’s member banks are expected to develop a
framework that could see qualifying distressed borrowers having
their installments reduced without incurring extra costs.
One of the lessons to come out of the Marikana incident is the
widespread abuse of garnishee orders by certain credit providers.
Some employers of indebted workers were allegedly asked by some
lenders to pay part of the employees’ debt over to the lender with
interest. To deal with this abuse, The Banking Association members
have agreed not to use garnishee orders against credit defaulters. To
enforce this commitment, National Treasury is expected to engage
and suggest to the Department of Justice that garnishee orders be
limited to maintenance orders.
There are also moves by member banks to start up a consumer
education fund that would educate the public about borrowing and
other financial matters. The issue of consumer education could go a
long way in protecting borrowers from rogue credit providers such
as those who retained bank cards in Marikana and other areas in the
country. Writes Phakamisa Ndzamela ■
Edition 4
BANKER SA
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