Skip to main content
placeholder image

South Africa's National Credit Act: Successes (and failures) in preventing reckless and predatory lending

Journal Article


Abstract


  • South Africa is a developing country of approximately 55 million people, of which

    40 million are regarded as economically active, and fall between the ages of 15

    and 64. 1 Of this, approximately 25 per cent are unemployed, with many adults

    classified as illiterate.2 This presents opportunities for unscrupulous financial

    service providers, especially lenders, to take advantage of the large number of

    unsophisticated financial consumers in South Africa. In 2002 the South African

    Department of Trade and Industry (DTI) recognised that the situation in the

    consumer credit market was untenable. Existing legislation provided inadequate

    rules regarding disclosing the cost of credit, consumers were uneducated regarding

    financial matters ( especially when it came to understanding the concept of interest

    and fees), and there was excessive predatory behaviour among credit providers,

    who often made no attempt to establish whether consumers were in a position to

    repay their debts.3 A study conducted by the DTI in 2004 revealed that the credit

    market in South Africa, which had developed over a period of 40 years, was

    inappropriate for the development of a new democratic society, which aimed to

    cater for all its citizens. It was a market which both reflected and reinforced two separate economies in South Africa.4 On the one hand there was (and still is) a

    modem, first-world industrial, mining, agricultural, financial and services sector,

    which produces most of the country's wealth, and on the other, a third-world

    economy, in both urban and rural areas, where the majority of poor, mainly black,

    people live.5 This second economy was characterised by severe underdevelopment,

    accessing credit was difficult, the costs were extremely high, and consumer

    protection measures were limited, if not non-existent. For all these reasons, a

    fundamental restructuring of the credit market and its regulation was found to be

    necessary. 6

UOW Authors


  •   Schmulow, Andrew
  •   Woker, Tanya (external author)
  •   Van Heerden, Corlia (external author)

Publication Date


  • 2019

Citation


  • A. Schmulow, T. Woker & C. Van Heerden, 'South Africa's National Credit Act: Successes (and failures) in preventing reckless and predatory lending' (2019) 2019 (2) Journal of Business Law 122-139.

Ro Metadata Url


  • http://ro.uow.edu.au/lhapapers/3830

Number Of Pages


  • 17

Start Page


  • 122

End Page


  • 139

Volume


  • 2019

Issue


  • 2

Place Of Publication


  • United Kingdom

Abstract


  • South Africa is a developing country of approximately 55 million people, of which

    40 million are regarded as economically active, and fall between the ages of 15

    and 64. 1 Of this, approximately 25 per cent are unemployed, with many adults

    classified as illiterate.2 This presents opportunities for unscrupulous financial

    service providers, especially lenders, to take advantage of the large number of

    unsophisticated financial consumers in South Africa. In 2002 the South African

    Department of Trade and Industry (DTI) recognised that the situation in the

    consumer credit market was untenable. Existing legislation provided inadequate

    rules regarding disclosing the cost of credit, consumers were uneducated regarding

    financial matters ( especially when it came to understanding the concept of interest

    and fees), and there was excessive predatory behaviour among credit providers,

    who often made no attempt to establish whether consumers were in a position to

    repay their debts.3 A study conducted by the DTI in 2004 revealed that the credit

    market in South Africa, which had developed over a period of 40 years, was

    inappropriate for the development of a new democratic society, which aimed to

    cater for all its citizens. It was a market which both reflected and reinforced two separate economies in South Africa.4 On the one hand there was (and still is) a

    modem, first-world industrial, mining, agricultural, financial and services sector,

    which produces most of the country's wealth, and on the other, a third-world

    economy, in both urban and rural areas, where the majority of poor, mainly black,

    people live.5 This second economy was characterised by severe underdevelopment,

    accessing credit was difficult, the costs were extremely high, and consumer

    protection measures were limited, if not non-existent. For all these reasons, a

    fundamental restructuring of the credit market and its regulation was found to be

    necessary. 6

UOW Authors


  •   Schmulow, Andrew
  •   Woker, Tanya (external author)
  •   Van Heerden, Corlia (external author)

Publication Date


  • 2019

Citation


  • A. Schmulow, T. Woker & C. Van Heerden, 'South Africa's National Credit Act: Successes (and failures) in preventing reckless and predatory lending' (2019) 2019 (2) Journal of Business Law 122-139.

Ro Metadata Url


  • http://ro.uow.edu.au/lhapapers/3830

Number Of Pages


  • 17

Start Page


  • 122

End Page


  • 139

Volume


  • 2019

Issue


  • 2

Place Of Publication


  • United Kingdom