The Department of Trade and Industry published a notice on 21 August 2015 (GG 39127) confirming the suspension of the affordability assessment regulations under the National Credit Act 34 of 2005 for a period of six calendar months effective from 13 March 2015. The notice further indicates that until the suspension is lifted on 13 September 2015, the affordability assessment guidelines that were published by the National Credit Regulator in September 2013 will be enforceable.
The affordability assessment regulations came into effect on 13 March 2015 which makes it mandatory for credit providers to “take practicable steps” to assess the consumer’s discretionary income in order to determine whether the consumer has the financial means and prospects to pay the proposed credit instalments. The National Credit Act prohibits credit providers from granting “reckless credit”. A credit provider must not enter into a credit agreement without first taking reasonable steps to assess the proposed consumer’s existing financial means, prospects and obligations (amongst other things). If this is not done, the credit agreement could be declared as reckless which gives a court or tribunal the power to either set aside the consumer’s rights and obligations under that agreement or suspend the force and effect of that agreement.
The affordability assessment regulations in essence require credit providers to consider the following before granting credit:
- three months bank statements or payslips;
- a consumer’s credit profile as contained at a credit bureau;
- calculation of consumer’s necessary expenses such as accommodation, transport, medical, education, food, water and electricity (table provided in the regulations to ensure that consumers are not understating their expenses);
The publication of the notice seems to be somewhat superfluous. There is only a little over 3 weeks left for credit providers to implement the necessary “system changes” since the date of publication of the suspension notice was on 21 August 2015 and the date upon which the suspension will be lifted will be on 13 September 2015. After the suspension is lifted the affordability assessments will become compulsory and enforceable by the National Credit Regulator. This probably does not give credit providers the necessary time to comply which was their original grievance with the regulations. Safe to say, credit providers should finalise their system changes at this stage in order to ensure compliance with the regulations before the suspension is lifted.