Department of Trade and Industry believes that the extinguishing of debt as proposed in the draft National Credit Amendment Bill, will be constitutional as long as it follows a particular process, which embodies the “audi alteram partem” (“hear the other side”) rule.
This was the view of senior counsel, which advised the department on the constitutionality of the draft bill, which aims to offer debt relief including, ultimately, writing off debt to those with a gross income of less than R7, 500 and with no realisable assets.
Trade and Industry director-general Lionel October was responding on behalf of the department and the National Credit Regulator, to the public comments on the bill proposed by Parliament’s trade and industry committee.
The banking sector opposes the bill, arguing that banks have their own effective debt-relief measures. Concerns were expressed that the extinguishing of debt would be unconstitutional as it would deprive credit providers of their property.
October said in a briefing to Parliament’s trade and industry committee that all jurisdictions accepted that debt could be extinguished (for example in liquidations, business rescue and debt write-offs) and that this was not expropriation. What was important was that the process was followed and that the other side had an opportunity to be heard.
Debt could not be written off in a generic way using a “sledgehammer” approach without dealing with the individual over indebted applicants and the individual credit providers. It could not be done on a group basis.
“We have to strengthen the bill to allow for the National Consumer Tribunal to play a bigger role and to allow credit providers to have some say in the process,” October said.
He stressed that the department fully supported the bill but would propose certain amendments to strengthen it. Interventions would also be required to strengthen the capacity and powers of the National Credit Regulator and the National Consumer Tribunal.
The department had estimated that there were about 1.7-million potential individuals who would fall into the targeted group of indebted consumers who could benefit from the proposed debt relief. October said the department would propose that the National Credit Regulator be empowered to employ about 70 debt intervention officers to assist the very vulnerable who had not benefited from the debt counselling system.
“We are proposing that the National Credit Regulator provide direct assistance to this low-income group,” October said.
In terms of the legal opinion given to the department, the draft bill needs to give the National Consumer Tribunal the discretion to suspend debt and extinguish debt in a fair way. The bill would have to be amended to give the tribunal the necessary powers and discretion to do this.
The legal opinions obtained by both the department and the Treasury stressed that credit providers must have the right to make submissions to the regulator and the tribunal.
By: Business Live