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South African Retail Conference South African Consumer Credit Outlook and Legislation presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL CREDIT REGULATOR

NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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Page 1: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

South African Retail Conference

South African Consumer Credit Outlook and Legislation presentation by: Ms Nomsa Motshegare, NCR CEO

Date: 7 October 2014

NATIONAL CREDIT REGULATOR

Page 2: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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OVERVIEW OF PRESENTATION

Current Credit Landscape

Consumer Credit Health

Household and Consumer Debt

Current Challenges in the Market

Debt Counselling Stats

National Credit Amendment Act, 19 of 2014

Cross Boarder issues

Conclusion

Page 3: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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Credit Providers

Credit Providers = +4550

Credit Bureaus

22.12 million Credit Active Consumers

Debt Counsellors

Credit Bureaus = 14

Debt Counsellors = +2130

The current credit landscape

Page 4: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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CONSUMER CREDIT HEALTH

• The pattern of increasing household debt in South Africa is very

similar to the global experience.

• “Consumer Credit Health Deterioration moderates in 1st Quarter

(TransUnion Consumer Credit Index)”: The TransUnion SA

Consumer Credit Index (CCI) increased to 49.4 in Q1 2014 from

a revised 48.9 in Q4 2013 (preliminary 47.2); Q1 2013: 45.1.

• Likely contributors to this are a combination of the following: loan

term restructuring, slow rates of unsecured lending (Dec. 2012 y-

o-y increase was 47%; for June 2014 y-o-y increase is at 2.56%

and more prudent debt book management by credit providers.

Page 5: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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Disbursement vs. Outstanding Debtors Book - Grand Total

Page 6: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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Percentage distribution of disbursement per credit type

Page 7: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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HOUSEHOLD DEBT TO DISPOSIBLE INCOME

• Household debt to disposable income in SA is still high, even though

the overall household indebtedness is actually down from its early

peaks: Q4 2008: 81.9% and this fell to 74.3% in Q4 2013 but slightly

rose to 74.5% as at the Q1 of 2014;

• Indication that large portion of household incomes still goes to

servicing debt. Thus it is important to contain this especially since it

is vulnerable to interest rate increases.

CONSUMER INDEBTEDNESS: Quarter ended June 2014

• Impaired consumers – 45%

• Impaired records – 26.8%

HOUSEHOLD AND CONSUMER DEBT

Page 8: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

The current credit landscape…performance of

consumers

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- Consumers with impaired records increased in June 2014, the majority of which are 3 or more months in

arrears

- Consumers still showing elements of debt stress, the effects of the removal of adverse information only to be

effective if consumers continue to service their debts

The current credit landscape…performance of

consumers

Page 9: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

The current credit landscape…the

performance of accounts

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- Accounts with impaired records increased in June 2014

Page 10: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

Some current challenges in the market

Inadequate affordability assessment

Growing number of consumers with

impaired credit records

Excessive pricing of credit life insurance

Previous unprecedented growth in

unsecured credit (effects of growth in

unsecured credit still being felt now)

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Page 11: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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DEBT COUNSELLING STATS (APRIL TO AUGUST 2014)

ITEM FIGURES

APPLICATIONS

No. of applications(current financial year) 58400

Monthly no. of apps on average(current financial year) 11680

Court orders granted(cumulative) 84480

Clearance certificates issued(cumulative) 6139

ITEM FIGURES

PAYMENT DISTRIBUTION Distributions(current financial year)

R1.9 billion Distributions(cumulative)

R17.8 billion

NOTE: Cumulative figures are from inception to date

Page 12: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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NATIONAL CREDIT AMENDMENT ACT, 19 OF 2014

• In 2010 the dti conducted an analysis of the policy of the NCA with

the objective of identifying any implementation challenges.

• The necessary amendments have been incorporated: on 19th of

May 2014, the State President assented to the National Credit

Amendment Act.

KEY AMENDMENTS

• Payment Distribution Agents, Alternative Dispute Resolution Agents

and small credit providers will be registered by the NCR;

• Debt counsellors to issue clearance certificates to consumers where

consumer paid up all other debt other than mortgage agreement;

• The affordability assessment regulations;

Page 13: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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NATIONAL CREDIT AMENDMENT ACT CONTINUED

KEY AMENDMENTS CONTINUED

Improving Standard of Service and Procedures for Debt

Counsellors;

Automatic removal of Adverse Consumer Credit Information +

Paid Up Judgements;

Reviewing the cost of credit life insurance to be capped

The extension of the Tribunal’s powers to pronounce on reckless

loans.

Collection and selling of prescribed debt prohibited

Review of Interest and fees

Page 14: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

CROSS-BOARDER ISSUES

Many companies operating in other countries such as the US, UK, Australia,

Mauritius opened offices in South Africa

Their business models not in line with the National Credit Act and have

caused problems in the South African credit market

There is a need for a co-ordinated approach to cross-border regulation and

enforcement

NCR is proposing a formal international forum to discuss and formalises

processes for cross border co-operation

Meetings will be scheduled with regulators

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Page 15: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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CONCLUSION

SA Economy is challenged by slow growth, high unemployment &

over indebted households according to the Medium Term

Expenditure Framework. • Robust culture of savings to be developed;

• Targeted consumer education campaigns + financial literacy programmes: -

improved understanding of credit savings & investment options to better take

care of their financial future;

• Visible enforcement

Proposed component for a response to consumer debt stress: • National awareness and education campaigns – we also need to educate

consumers to be responsible borrowers.

• Debt counselling support to ensure it is an effective intervention

There is still a long arduous journey ahead

Lets us work together to make SA a better place to restore the

dignity of especially the poor and marginalised.

Page 16: NATIONAL CREDIT REGULATOR - Absaetfcib.absa.co.za/presentations/Nomsa Motshegare presentation - S… · presentation by: Ms Nomsa Motshegare, NCR CEO Date: 7 October 2014 NATIONAL

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Thank You!

www.ncr.org.za