Parliamentary hearings on the "Debt Bill"
The Department of Trade and Industry (DTI) briefed the Portfolio Committee on Trade and Industry on its view on stakeholders’ submissions to the Draft National Credit Amendment Bill, 2018 (hereafter the Debt Bill), on 14 February 2018. The briefing forms part of the continuing public consultations on the Debt Bill.
In terms of the Memorandum of Objects to the Debt Bill, South Africa has 24,68 million credit active consumers of which 14,99 million consumers are in good standing whilst 9.69 million had impaired records. 39,3% of the 9,69 million consumers with impaired records, are credit active but are over-indebted. Existing mechanisms for debt intervention such as: insolvency; debt review and debt administration do not assist vulnerable groups that earn less than R7500,00 per month.
The Debt Bill provides for a capped debt intervention for persons earning R7,500 per month and with less than R50,000 in unsecured debt. A person falling within this category, could make an application to the National Credit Regulator and if such a person qualifies and is unable to repay their debt, such debt could be suspended for up to 24 months and extinguished, if their financial situation does not improve.
A unique feature of this bill is that it is a bill being initiated and drafted by the committee to be introduced to Parliament. This is a type of parliamentary initiated process, while allowed by the Constitution, has rarely been implemented. Parliamentary bills usually take the form of a private members bill, whereby a Member of Parliament (MP) of a political party introduces a bill in Parliament.
In terms of the Constitution, the legislative authority vests with Parliament and only Parliament can make laws. Once Parliament finalises a bill, it is referred to the President as the head of the executive, to enact the bill. The Executive is tasked with implementing the law. Parliament in conducting oversight will hold the Executive and its department accountable in terms of how the law is implemented.
The usual practice in the legislative process is that a bill is drafted by the Executive and its relevant department. Such a bill follows a lengthy process of consultation prior to it being approved by Cabinet and then referred to Parliament.
The Debt Bill, being a committee bill, bypasses the executive processes in the legislative process. However, the committee is expected to undertake a rigorous public consultation process before finalising the bill and tabling it before Parliament for its consideration. Although the Executive process is a cumbersome and lengthy process, it is perceived as a more rigorous one in terms of consultation.
The Fifth Parliament’s term will conclude when elections take place in the second quarter of 2019. Consequently, if the bill is not finalised by then, it will lapse. The bill will then not be part of the programme of the new Parliament.
The committee in the Sixth Parliament, can revive the bill; however, this may only be likely if the same Members of Parliament are appointed to the committee. I say this as new MPs may have their priorities. If it was an executive bill, then it could have either been revived by the new Parliament or the executive can refer the bill again to Parliament.
Parliament is made up of two houses, namely: The National Assembly (NA) and the National Council of Provinces (NCOP). The Constitution provides for guidelines as to how a bill is tagged. Tagging is a process of deciding how a bill will be dealt with in Parliament. The NA deals with issues affecting the national sphere of Government. Such a bill will be a section 75 bill and the NA has the final say on the bill.
The NCOP focuses on issues affecting the provinces. Such a bill is tagged a section 76 bill. For example, if a bill is referred to Parliament and deals with a trade issue, the bill will be tagged a section 76. This means that provinces have a direct input into the bill.
The Debt Bill affects “Trade” and “Consumer Protection” and is therefore tagged a section 76 bill, meaning both the NA and NCOP has concurrent jurisdiction. Although this adds rigor to the consultation process, it automatically lengthens the timeline of the bill being finalised.
The Debt Bill is welcomed and supported by Cosatu and Black Sash.
Black Sash explained that since the commencement of the Easypay Everywhere Bank account (EPE), also known as the Green Card, indebtedness for grant beneficiaries has increased, primarily due to loans being provided often without affordability tests, no proper avenues of recourse, no administration of justice and no debt counselling. This vulnerable group is therefore caught in a cycle of using debt to pay for food and basic living needs.
Cosatu strongly believes that the bill will provide a desperately needed lifeline for thousands of highly impoverished and indebted workers and their families.
Wonga submitted that their constitutional rights to property will be infringed. Although, it is not a property right in itself, it is, however, an intangible right that credit providers can act on.
Micro Finance South Africa is of the view that the Debt Bill will make it more difficult for targeted consumers to access further credit.
Nedbank pointed out that suspending credit agreements and extinguishing debt will not achieve the goal of relieving over-indebtedness. Instead it will create the impression that consumers can incur credit and default on their debts without any repercussions. This could lead to credit providers restricting credit to consumers where stability of repayment cannot be guaranteed.
National Treasury (NT) questioned the constitutionality of the bill on the grounds that extinguishing debt would deprive creditors of property, if it implies a deprivation of rights in terms of contractual obligations. NT recommended that the debt review system needs to be improved by addressing “who pays, and what fee”. NT further pointed out that the capped intervention could extinguish total debt of between R13,2 billion and R20,7 billion debt depending on the criteria introduced and cautioned the committee to take into account the wider economic impact.
On the issue of constitutionality, the DTI submitted that banking and credit institutions acknowledged that they do voluntarily extinguish debts and therefore cannot see the merit in such institutions opposing the bill. It further submitted that legal opinions are opinions and that the committee should continue with the bill. It recommended that, the Presidency send the bill to the Constitutional Court to obtain clarity on the constitutionality of the bill once it is adopted.
DTI’s submission was met with disappointment from the committee. It had hoped that the DTI, as the department that would eventually implement the bill, would give guidance on the issue of the constitutionality of the bill and most importantly, how the credit market will be impacted by the bill. The DTI will have to return to brief the committee comprehensively on the issues identified.
Although, the Debt Bill is a unique parliamentary bill and has not followed the process a bill usually follows in the executive, nothing prevents the committee from requesting the assistance of the Department of Planning Monitoring and Evaluation (DPME) and the Department of Justice’s Office of the Chief State Law Adviser (OCSLA). However, is not a requirement for a committee bill but rather my suggestion.
Bills following the executive process must go through the DPME to obtain a Social Economic Impact Assessment (SEIA). The SEIA can assist the committee with the impact the bill could possibly have on the economy and various stakeholders. Although, DoJ already briefed the committee and did not raise the issue of constitutionality, OCSLA provides legal opinions on the constitutionality and style of a bill before it goes to Cabinet and could assist the committee with its question around constitutionality.
This may assist the committee as it weighs and assesses the various interests in finalising a bill that could bring much needed relief to vulnerable groups and promote a change in the borrowing and spending habits of an over-indebted society.
CEO, Zelna Jansen Consultancy