DC Comunication from NDMA re VDMS June 2012

NDMA Communique

Voluntary Debt Mediation Solution Pilot (VDMS) Update Since the NDMA sent out the first communication regarding the Voluntary Debt Mediation Solution (VDMS) pilot we have received several enquiries. Most of the debt counsellor enquiries received related to requests to participate in the pilot. No specific complaints have been lodged about VDMS. However, the NDMA has been made aware of some questions and concern regarding VDMS, mainly from media sources, to which the NDMA duly replied and the NDMA provided all the requested information.

We therefore would like to publish and provide the list of questions received to date and the NDMA’s response to them.

The Statutory Process is working - why is there a need for Voluntary Debt Mediation Solution?

If the VDMS proves feasible, it is not intended to replace the statutory process but is intended to be an early option made available to consumers. Below is the over indebtedness status in South Africa.

 19.3 million Credit active consumers;  96 000 civil summonses for debt of which 87 716 are to individuals for the month of March 2012;  41 495 judgments of which 37 754 were against individuals for the month of March 2012;  3.6 million 3+ months in arrears as at December 2011;  2.6 million ith judgments as at December 2011; and  6000 applications for debt review per month.

Statistics South Africa shows that as at the end of March 2012 the number of civil summonses for debt issued was 96 698 of which 87 716 related to private persons. Civil judgments numbered 41 495 with 37 754 being against private persons. While not all the debts relate to credit agreements as per the NCA but a sizeable portion (more than 40%) related to money lent, goods sold on credit and credit facilities. While there is evidence of a decline in summonses issued and judgments obtained, the number of consumers who end up in this situation is unacceptably high. If the number of judgment and summonses issued monthly are compared to 6000 debt counselling applications per month, there is clearly a need to do something. The VDMS pilot will hopefully shed light on this issue taking into consideration both credit provider and consumer behaviour.

The NDMA in partnership with the NCR and the credit industry has conducted major awareness programs and still consumers are not taking up any of the options available to them to resolve their financial difficulties. Many consumers who approach the NDMA for assistance only do so when the debt enforcement process is far advanced or when the credit provider already has the right of execution through a court order.

In South Africa, a consumer in default is likely to enter either a Product Level Collection (PLC) process (where the focus is to bring a consumer up to date on a particular credit agreement) which may lead to legal action, and/or the statutory debt review process (where the focus is rehabilitation). While most credit providers have begun to make significant efforts in the PLC process to help many consumers bring their payments up to date and avoid legal action, the nature of the PLC process can prevent the rehabilitation of those consumers that are over-indebted and have multiple credit agreements (as is often the case). This is largely because in the PLC process any new arrangement does not take into

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account the consumers other credit agreements, and in not doing so, fails to address the structural level of overindebtedness.

Importantly, under the NCA, as a pre-requisite for further legal action, the credit provider is required to issue a Section 129 notification. Once this notice has been issued for a particular credit agreement, that credit agreement can be excluded from any debt review process into which the consumer may subsequently enter. This reduces the chance of a consumer’s rehabilitation as their debt cannot be holistically restructured and differing demands and treatment by credit providers. The Sebola case has demonstrated the delivery problems that exist in the market, that are even beyond the consumer or credit provider’s control. The ruling also signals the need for credit providers to change how they deal with consumers experiencing payment difficulties. The ruling is very clear that the intention of the NCA was to have a consensual process before formal litigation.

Besides the opt outs that result from the Section 129 notification, the debt review process faces a number of other challenges that arise from the rights that credit providers have in terms of the Act. The right of the credit provider to terminate also compounds the problem. The time, effort and cost of taking a matter to court are prohibitive both for the consumer and credit provider. The Department of Justice has published new court rules to pilot a court mediated process before a matter is heard in court. This signals a preference for mediation before formal litigation and as a result, it is important that voluntary debt mediation be piloted and if successful implemented.

How different will VDMS be from statutory?

While some argue that VDMS is not different from statutory, the possible positive gains that can be made by first trying to reach consensus before going to court as well as the early identification and referral of the consumer should not be undermined. Courts processes are by nature arduous, long and expensive. As court decisions set precedent parties will fight to the teeth to defend matters and we have seen this play out with the statutory process. A contested debt counselling case that lends up in court cost the consumer thousands of rands, money they can ill afford based on their difficult financial circumstances. The big test will be the extent to which credit providers and consumers will comply with a voluntary agreement. Court orders in themselves are not a guarantee of compliance.

While the court process will be preceded by an informal agreement, credit providers have made a commitment not to take legal action against the consumer as long as they comply with the agreement. This means that the consumer will still have the same protection they have under the NCA. The following are the main differences: a) b) c) d) e) f)

Early identification and referral of the consumer by the credit provider; No Court confirmation backed up with stay of legal action; DCRS compulsory unless there is no solve, then negotiation is allowed; Rehabilitation is when consumer can resume normal contractual instalments.

Disputes to be mediated by the NDMA; Process less expensive and quicker due to elimination of court process.

Why should Credit Providers refer and will this not result in a conflict of interest?

Some stakeholders have suggested that good awareness and educational programs will galvanise consumers to act early when they are experiencing financial difficulties. The problem of consumers not being proactive in dealing with their financial difficulties is an international problem and is due to a combination of factors, including consumer behaviour as well as credit provider approaches to collections and debt enforcement.

In the UK the Consumer Credit Counselling Service, an NGO that provides debt mediation services to consumers dealt with 340 000 calls to its helpline for 2011 only. 56% of cases were referred by credit providers and 22% by family and friends. Their report indicates that 45% of their clients took one year before they took action. In South Africa a credit provider can commence legal action if a consumer is in default by at least 20 business days. The NDMA has observed the same trend where consumers only seek help very late and usually at the stage that the credit provider has obtained

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a court order and are in the process of executing it. By this time, entering debt review is not an option unless ordered by a court.

We have seen in South Africa that various educational and awareness drives have not succeeded in significantly increasing the number of consumers who take up debt counselling or other voluntary options available. The 2011 fourth quarter NCR CBR report shows that of 19.3 million credit active consumers, 2.85 million were 1 -2 months in arrears, 3.6 million 3+ months in arrears and 2.7 million had judgments or administration orders against their names.

While not all these consumers are over indebted, the number is still high enough to warrant the investigation of alternative methods to reach and assist consumers.

Since 2007 and as of end December 2011, only 289 000 consumers have applied for debt review and close to 50% have been rejected, terminated or voluntarily withdrawn, leaving about 186 305 either active or still being considered.

A “push� by credit providers has to be tested to see if more consumers can be assisted if the referral is done by the credit provider prior to the credit provider taking legal action against the consumer. The credit provider is the only party who is at all times aware of the status of the consumer and who has the capacity to contact the consumer if the consumer is finding it difficult to meet their obligations and explain the options available to them. If the push by credit providers succeeds, it will be a fundamental shift in how credit providers deal with clients in financial distress, in that instead of harassing them for payment or taking legal action against them, they will recommend that they consider entering VDMS. This is in the true spirit of section 3 of the NCA. In the VDMS, while credit providers will refer consumers, the debt mediator will still be the party that independently assesses for over indebtedness, determines affordability and develops a restructuring proposal for presentation to the credit provider. This will prevent the credit provider from influencing this important process and protect the consumer from unreasonable demands by the credit provider. It will also provide the debt mediator with the opportunity to also independently assess for reckless lending. VDMS will create transparency where it currently does not exist. The Consumer Credit Counselling experience shows that a referral by the credit provider is a good thing, especially if the entity to which the referral is made remains independent in developing a solution for the consumer.

It was a deliberate choice for the NDMA NOT to be the mediator in the context of the pilot. This was to ensure that the NDMA plays a facilitation role between the credit industry, the regulator and various industry players. The NDMA will also play the role of overseeing the project and the conduct of the various role players.

If the VDMS pilot project succeeds, many more consumers than ever before will be offered the opportunity to be assisted in a transparent, structured, cheaper and sustainable way through direct interaction without limiting any rights or statutory options that the consumer may have. The NDMA will be responsible for ensuring that both the credit provider and the debt mediator act with integrity, fairness and transparency. The MOU that all parties will sign will ensure this.

If credit providers refer consumers they will have no incentive to pass on work to people who expose their bad practices.

At present credit providers do refer consumers to some debt counsellors, but the criteria through which they do it is not uniform and is subject to internal policies not shared across industry. This leaves thousands of consumers out in the cold and vulnerable to legal action. It also creates doubt and distrust in the market. Should VDMS prove feasible, one of the positive outcomes could be a transparent process of referral through the NDMA. This is a complex and possibly controversial issue where stakeholder engagement will be necessary to agree on the right criteria and standards.

It is also not only up to the debt mediator to expose a rogue credit provider. For the year ending December 2011 of 1877 complaints received by the NDMA, 56% were from consumers and 39% from debt counsellors. We put emphasis on consumer awareness and education because well informed consumers will be able to ask the right questions and lodge complaints if rights have been transgressed. The fact that the NDMA is making this pilot project public is an indication that this is work done in good faith and open to scrutiny and criticism.

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Participating credit providers are expected to make full and detailed disclosure to a consumer who enters VDMS about their rights and obligations, as well as the remedies available to them should they not be happy with any aspect of the process.

If the pilot yields positive results and a decision is made to proceed with the full scale implementation of the system, a transparent and fair system of referral will need to be worked out. The NDMA has raised this issue with the two debt counsellor associations and have requested that they begin applying their minds to this issue.

Why is only a few debt counsellors selected to participate in the process and what was the criteria applied?

Taking into consideration that this is not a full scale implementation of an initiative but a very controlled pilot project utilising a limited sample of cases, only a few parties could be involved. Due to the many legal and procedural uncertainties regarding a possible voluntary process, only a small sample of cases will be tested. For the initial phase of the pilot only 5000 consumers will be identified and referred into VDMS. Of the 5000 referred it is possible that take up might be close to 20% and a major focus of the pilot would be to understand why consumers do not take up and how they behave once they have taken up. Participating mediators are therefore going to end up with very few cases on their books as a result of the VDMS. If VDMS succeeds then the process will need to be opened up to all debt counsellors who are willing to offer the option to consumers.

The intention of the pilot is to ensure that a high percentage of acceptable proposals are generated and consented to.

In order to achieve this, the current agreed industry restructuring rules will play a central role in solving each case. Since the Implementation of the DCRS in February 2011, many debt counsellors have had to adjust their systems to interface with the Rules Engine. Experience has shown that this is quite an involved process that takes a few months.

In order to limit the cost of the pilot, it was important to utilise existing capacity both in the debt counsellor and credit provider space. This meant minimal system, documentation and process changes. As a result a decision was made to use those DC Companies that had already overcome the hurdles of interfacing with the DCRS and were already generating the highest number of proposals.

Based on statistics drawn from the DCRS, the companies that generated the most proposals were identified are Octogen, Debt Busters and Consumer Assist.

It is important to note that while registered debt counsellors are being used for the pilot, their role is to act as debt mediators as defined in the pilot rules and procedures. Once the pilot has come to an end and it has proved to be successful it is anticipated that all registered debt counsellors who are in good standing with the NCR will be able to, in addition to the statutory process, offer VDMS as an option to consumers experiencing financial difficulties.

In the meantime debt counsellors can, as an additional option continue to use the NCR approved industry restructuring rules as contained in the DCRS. All Debt Counsellor System Providers are linked to the DCRS and as such a majority of debt counsellors should be able to access the DCRS option. A valid DCRS proposal carries automatic consent by subscribing credit providers. Should a credit provider who subscribes to the industry code of conduct refuse to accept a valid DCRS proposal, a complaint can be raised with the NDMA. Debt Counsellors who are utilising the DCRS are reporting a 70% to 80% solve and acceptance rate.

What Criteria will be used to identify eligible consumers?

In order for a consumer to be eligible for VDM the consumer must be experiencing difficulty in meeting contractual credit agreement payment.

The VDM process will encompass 2 main eligibility tests:• •

The first pass eligibility test and the second pass eligibility test.

The first pass eligibility test is conducted by the credit provider and is split into two stages: 

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Stage 1: is conducted by the credit provider to determine how far a consumer is in arrears and deals primarily with the type of consumer or account that may be eligible for (“pushed into”) VDM ; and

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

Stage 2: is also conducted by the credit provider and is performed when the Debt Mediator requests the certificate of balance from the Credit Provider.

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The second pass eligibility test is conducted independently by the Debt Mediator and deals with the affordability assessment. This is the point where the debt mediator will look at all the consumer’s credit agreements and determine whether the consumer is over indebted or not.



A credit agreement in respect of which the debt has prescribed will be excluded.

The VDMS will include cases where legal action has commenced up to before court order/judgment. All categories of debts will be included and VDMS requires suspending legal action for the duration of the mediation. Credit Providers can elect to keep a consumer in VDMS post-judgment.

Who will bear the costs of the Pilot?

Credit Providers will bear the costs of the pilot. A consumer who elects to participate in the pilot will therefore only incur the cost of the PDA. However there is no commitment post the pilot to fund or subsidise the consumer’s costs of entering the process. This is a discussion that will be held once a proper cost benefit analysis has been performed based on the results of the pilot.

What is the duration of the pilot?

The pilot is for 12 months commencing from 2 July 2012.

Which credit providers will participate in the pilot and how will they be held accountable?

A National Credit Industry Steering Committee (NISC) which has representation from all the industry associations has been established. This includes the Banking Association, Motor Finance Association, Micro Finance South Africa, National Clothing Retail Federation and Consumer Goods Council of South Africa, representing furniture retailers. All of the associations will sign a Memorandum of Understanding that binds them and their individual members to abide by the rules of the pilot. All the major banks, clothing retailers, furniture retailers, micro lenders and motor finance companies that belong to the associations are participating in the pilot.

The role of the NDMA would be to ensure that all parties to the MOU comply.

How will the accepted restructuring proposal be treated?

In VDMS, there will be no requirement to have the accepted proposal confirmed by a Court or the Tribunal. Credit providers will restructure on final acceptance and not commence with any legal action as long as the consumer complies with the accepted proposal. This will ensure a quick turnaround time for concluding the process as well as save the consumer and credit provider further legal costs.

If a consumer has difficulty in meeting their restructured obligations, the first step before any action is taken will be to investigate whether it is a technical or consumer issue. There will be continued engagement with the consumer before any drastic action is taken.

Where a proposal does not solve in terms of the DCRS, the debt mediator will still be able to submit a non DCRS proposal, which credit providers will consider and accept if it makes economic sense. A consumer can also opt to go into the statutory process if they do not solve under VDMS. How will reckless lending be treated?

In instances where a consumer alleges reckless lending, the consumer will be at liberty to pursue the matter as per the current process in the NCA Allegations of Reckless Lending will be included in VDMS and will only be removed from VDMS once an application is made to court to hear the matter. VDMS will not prevent the NCR from playing its normal enforcement role, which includes initiating a complaint in terms of section 136(2) if they suspect that there might be

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activities taking place that are meant to circumvent the law, even where no specific complaint has been raised by the consumer.

How will disputes be dealt with?

The NDMA dispute resolution process will be followed for disputes raised for the duration of the VDMS Pilot. Mediators will subject themselves to the jurisdiction of the Credit Ombudsman where a consumer is not satisfied with the outcome and where the NDMA was not able to mediate the matter.

How is VDMS different to DCRS? DCRS is a central standardised system that calculates and executes the application of the industry agreed and NCR approved debt restructuring rules. It is basically a calculator that calculates a restructuring proposal after the debt counsellor has concluded an affordability assessment. Debt Counsellors can opt to use their own restructuring rules or rely on the magistrates. Credit providers are obliged to consider all proposals and not only DCRS proposals. However some debt counsellors prefer the DCRS as it reduces the need for circular and prolonged negotiations and the interest and fee reductions results in a high solve rate.

VDMS is a pilot that will use the DCRS as a tool to calculate restructuring proposals.

Is this not a ploy by credit providers to use section 129 notices to exclude consumers from entering debt review and kill the statutory process?

The consumer protection Act indicates that one of the fundamental rights consumers have, is the right to choose. In order to support this right the consumer needs to be empowered with correct and sufficient information to make the right choice. Each consumer who experiences financial difficulties has access to a myriad of options both in the NCA and other pieces of legislation. If successful VDMS will just be one of the options a consumer chooses based on their individual circumstances and preferences.

At the point of contacting the consumer the credit provider is obliged to explain to the consumer all the options that are available to them including formal debt review. Only those consumers who give upfront consent to enter VDMS will be accepted into the program.

The NDMA’s view is that the current exclusion of accounts on which a section 129 notice have been issued is problematic for the consumer for several reasons.    

Firstly, it results in that credit agreement being excluded and as such reduces the comprehensiveness and sustainability of any resolution that may come about; Secondly, the consumer faces legal action if he is unable to bring the obligation up to date, decreasing the chances of his rehabilitation if over-indebted; Thirdly, courts are faced with a number of cases that could potentially have been avoided if the consumer had been able to restructure his debts through an alternative or the debt review process; and Fourthly, a debt review proposal and repayment plan is potentially eroded by the subsequent outcome of legal action with regard to an excluded credit agreement. This is because it may impact on a consumers affordability and therefore his ability to meet the obligations of the agreed to repayment plan.

Including section 129 will improve the chance of rehabilitation as the consumer’s debt will be holistically restructured at a hopefully lower cost than if legal action was taken. The issuing of a section 129 notices is not optional for credit providers. It is a legal requirement of the Act. Without issuing a section 129 they limit their legal enforcement rights, which was not the intention of the Act. The consumer is a central player in this process and the Act is designed in such a way that the consumer and the credit provider maintain communication with each other before legal action is taken.

Section 129 presents such an opportunity. However many consumers do not know where to go and have limited options once a matter has reached section 129 stage. Even where a section 129 has been issued, there are checks and balances in the Act to ensure that a consumer is not prejudiced by the actions of the credit provider.

The courts can always refer any credit agreement to a debt counsellor as per section 85 and if the matter was terminated a reinstatement is possible in terms of 86(11) of the NCA. Where, for example, a credit provider issues a

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section 129 and seeks judgment in a court: The consumer can still raise over indebtedness as a defence and in response the magistrate may order that the credit agreement be referred to a debt counsellor or debt review resume on any conditions the court considers to be just in the circumstances and that may lead to the matter being referred to a debt counsellor to evaluate the consumer’s circumstances and to make an appropriate recommendation to the court.

The recent Sebola Constitutional Court Case is a signal to the industry that they need to manage the section 129 process differently, where a true opportunity is given to the consumer to remedy their default is provided. VDMS would ensure that there is a uniform industry agreed process to deal with consumers who are vulnerable to legal action.

Contrary to limiting the consumer’s rights, the VDMS may rather create the opportunity for the consumer to resolve certain issues easier and quicker in a more structured way and will be a more sustainable portfolio solution than when a consumer attempts to negotiate with credit providers individually. Application of the VDMS is also a partial fulfilment of an obligation that credit providers have in terms of the Industry Code of Conduct to Combat Over-Indebtedness to provide relief to the consumer through consensual arrangements.

Is the NDMA overstepping its mandate?

The NDMA is operating squarely within the NCR approved Credit Industry Code of Conduct to Combat Over indebtedness. The Code emanates from a requirement by section 48(1)(b) of the NCA that credit providers have to contribute to combatting over indebtedness. This section is a clear policy directive from the Department of Trade and Industry, through the NCA, that the Credit Industry is expected to do more than the Act requires in combating over indebtedness. The Act does not dictate what the Code should deal with and this allows space for constant innovation, obviously within the confines of what is lawful and fair.

In addition to the commitments made to support and improve the statutory process, one of the primary aims of the Code is to create a process where consumers can obtain relief through consensual arrangements with their credit providers based on reciprocal commitment from consumers.

The NDMA is mandated, in terms of that Code to: Execute collaborative obligations of the credit industry under the Code;  Adopt and implement the approved restructuring rules and other approved guidelines;  Manage the Central Rules Engine;  Co-ordinate industry and stakeholder engagement and inputs into the Debt Review Advisory Committee (DRAC);  Facilitate the adoption and implementation of process enhancements by credit providers;  Co-ordinate the development and implementation of industry initiatives to facilitate a consensual approach to dealing with repayment problems and provide unbiased and independent consumer education on financial and debt management.

Receive, manage and resolve as far as possible complaints against credit providers;  Manage a national helpline to receive complaints;  Provide information to consumers Regarding over indebtedness;  Mediate conduct-related complaints and unresolved debt counselling cases; and  Refer unresolved complaints to the Credit Ombud, the National Credit Regulator (NCR) or the National Consumer Tribunal (NCT).

Monitor and enforce compliance by affiliated credit providers with the Code as well as rules and guidelines adopted under the Code;  Create awareness among credit providers about their obligations in terms of the Code;  Audit and report on compliance;  Conduct performance assessments against the Code;  Discipline members who continuously contravene the provisions of the Code; and  Report serious non-compliance to the NCR. The NDMA is committed to contributing to combating over indebtedness in South Africa. This it does by supporting the purposes of the NCA through introducing voluntary solutions agreed to by the industry after consultation with the

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relevant stakeholders. For the year ending December 2011, the NDMA has achieved the following in improving the statutory process and assisting consumers: a)

Established the central rules engine that has allowed debt counsellors who use it to achieve a 70% to 80% solve and acceptance rate, thereby reducing circular negotiation and matters that go to court on a contested basis; b) Initiated a project to develop and implement a central data switch to allow for the electronic submission of all debt counselling applications; c) Established the Debt Review Stakeholder Forum where debt counsellors, credit providers and payment distribution agencies meet monthly to discuss progress with the implementation of the NCR Task Team Recommendations as contained in the various industry codes. The Forum has also discussed and produced various guidelines to address issues like withdrawals from debt review, joint bonds and clearance certificates. d) Engaged and successfully brought on board credit providers who debt counsellors identified as important; e) Engaged directly with credit providers, especially banks to drive improvements in response times with regards to issuing of COBs, response to proposals etc.; f) Reinstated 426 terminated matters back into debt review; g) Saved 207 cars from repossession; h) Prevented 126 houses from being auctioned; i) Prevented 152 summonses from being pursued in the courts and facilitated a mediated solution that saved the credit provider and consumer thousands of Rands in legal fees; j) Reached millions of consumer through various media including radio, television, online and print media While the Code is voluntary, it is subject to the oversight of the NCR, which can deregister a credit provider if they don’t comply with the Code. The NCR can also order a review of the implementation of the Code. To date the NCR has been able to get 2612 credit providers to subscribe to the Code. This represents 62% in number of registered credit providers and more than 90% in value. This is a significant achievement which is paving the way for the NDMA to drive changes in the industry that will benefit consumers and the South African Economy. The NDMA is grateful to the NCR for the energy and effort put into implementing this important aspect of the Act. The NCR is therefore a central player in ensuring that the NDMA and Credit Providers comply with the Code and adhere to the commitments agreed to in the Code.

The NCA prohibits credit providers from lending to consumer while they are under debt counselling. Under VDMS, will credit providers be permitted to extend more credit to consumers in voluntary debt mediation?

Currently in terms of statutory debt counselling a consumer is flagged at the credit bureau and this can only be removed once a consumer has met all their obligations and have been issued with a clearance certificate by a debt counsellor. Experience has shown that consumers, who enter debt review due to retrenchment, job losses, income reduction, divorce etc., are able to revert to their normal instalments once they acquire a new job or once they recover from some economic setback. Usually consumers who recover want to resume their normal lives, which include the ability to buy or rent a house, buy a car etc. The industry is of the view that such a “hard luck”, ”good faith” consumers should be able to get a fresh start as soon as possible, without having to approach the courts to rescind an order.

In the VDMS there is agreement that a consumer who enters the process should not access additional credit as this might constitute reckless lending but the conditions under which the bureau flag should be removed might be different from the statutory process.

VDMS will allow unknown and unregulated ADR Agents to operate?

This is a matter to be addressed in the NCA and not the proposed VDMS. The wording of section 129 allows the consumer to approach, in addition to other entities an ADR agent to resolve a dispute or negotiate the bringing of payments up to date. Some ADR agents are at present unregulated entities or individuals. There are no uniform rules or standards to which they should adhere to, nor are the charges that they levy regulated. However the Consumer

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Protection Act could apply to such individuals or entities as they would fit within the definition of “supplier of goods and services”.

For the VDMS pilot only registered Debt Counsellors will be selected to act as mediators. Going forward the role of ADR agents is an issue that policy makers and regulators should pay attention to.

Conclusion Resolving over indebtedness is a complex issue which depends not only on the law but a change in behaviour and cooperation by all parties affected. While regulators have indicated that the rise in unsecured lending does not pose a systemic risk and therefore a bubble. The NDMA sees on a daily basis, individual bubbles. South Africa cannot afford to have households that experience the stress of having to deal with financial difficulties. The negative social and economic consequences are dire. We need to reduce the 41 495 judgments obtained and 96 000 summonses issued on a monthly basis as these possibly mean thousands of families who have to part with their homes.

International experience shows that voluntary options operate side by side with statutory options. While there will be controversies and disagreements, the NDMA is excited about the potential of the pilot to surface the complexities involved in dealing with over indebtedness and possible solutions to address them. The NDMA is also excited about the commitment by the credit industry to shift mind set, take responsibility, review their approach to collections and deal with consumers in a different way.

To do nothing in the context of the level of over indebtedness in South Africa, will be a disservice to individual consumers and households that have to deal with the stress and negative consequences of financial hardship. We have also seen the negative consequences that have arisen in the economies and financial institutions of countries where this issue was not dealt with properly. South Africa cannot go this direction. Sustainable solutions have to be tested and if successful implemented. South Africa is lauded for good policies but slow or unresponsive implementation. This is one area where South Africa cannot afford to fail.

We will continue to keep our stakeholders updated on the progress of the project and welcome any party who wishes to engage us on the project and its implications.

Magauta Mphahlele

Enquiries can be referred to: Santie Schindehutte VDMS Project Manager Tel: 011 326 3459 Email: SantieS@ndma.org.za End…………..

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