10 August 2005
Human rights organisation Black Sash wants the government to remove a section of the proposed National Credit Act that makes it possible for consumers to get a loan without any credit assessment deleted, saying it will expose the poor to abuse by unscrupulous lenders.
Speaking during a public hearing on the National Credit Bill in Cape Town last week, Black Sash advocacy coordinator Nceba Mafongosi told Parliament’s portfolio committee on trade and industry that the NGO was opposed to the emergency loan clause in the bill.
“It is the Black Sash’s opinion that people who are victims of unanticipated life events should not turn to micro lenders for help,” Mafongosi said.
The emergency loan clause covers details of a loan sought by a consumer to finance death, illness or loss caused by natural disasters. According to the clause, the lender can overlook certain issues pertaining to the applicant’s credit unworthiness, such as high debt level and low income.
However, the Black Sash says a majority of the poor who experience these forms of hardship don’t have the money to service any loan, and should not seek loans from micro lenders.
“A loan at an uncapped interest rate of which the industry standard is 360% per annum should not be the safety net into which such a person falls,” Mafongosi said.
“The state’s social security system is and should remain obliged to provide relief for people who have experienced an unanticipated life event.”
South Africa’s credit market, which is characterised by high interest rates and illegal debt collection methods, has prompted the drafting of the National Credit Bill.
The Bill, introduced in Parliament by the Department of Trade and Industry in June, seeks to address problems of over-indebtedness, reckless lending and consumer exploitation.