South Africa’s banks are concerned that some of their customers will get away with not having to repay their debt.
President Cyril Ramaphosa last week, signed the National Credit Amendment Bill into law, setting the groundwork for over-indebted consumers to have payments suspended, in part or full, for as many as 24 months, or even scrapped if their financial situation has been found to have worsened.
The bill was opposed by the banking industry, clothing retailers who provide credit and the opposition, Democratic Alliance as it would drive up the cost of loans for low-income earners, restrict lending and encourage bad behaviour from borrowers.
Following an economic impact assessment and engagement with the country’s Department of Trade and Industry, which is spearheading the bill, it was found that banks will either have to price in higher risks or avoid lending to low-income customers altogether.
South Africa’s National Treasury estimates that the debt-relief proposals could result in the write-off of R13.2 billion to R20 billion of debt under provisions of the bill.
