David Carte reports on Moneyweb :

“Banks and credit providers have R30bn of money owed to them by 180 000 debtors frozen under debt counseling arrangements under the National Credit Act.

The number of people under debt counseling rises by 7 500 a month, says outgoing National Credit Regulator CEO Gabriel Davel.

The positive angle is that banks and credit providers are receiving R180m a month or R2.2bn a year from these debtors under debt review.

Once a debt counselor is appointed in terms of the National Credit Act, the banks cannot move against the debtor for 90 days while he is being counseled. Lenders are prevented from applying to the courts for remedy. Meantime, when all else fails, it takes up to two years to get on a court roll.

As a result the National Credit Act – designed to protect consumers against reckless lending – threatens to turn into a grave threat to banks.

Johan de Ridder, an African Bank director and representative of the banks on the task force trying to solve the problem told Moneyweb: “The National Credit Act as it stands is a total failure”.”

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