Quentin Wray writing for Business Report writes that:

“There has been much confusion as to whether or not trade and industry minister Mandisi Mpahlwa has the right to raise the usury rate before June next year.

Now national credit regulator Gabriel Davel has clarified the matter, saying Mpahlwa has the right to hike the usury rate on the regulator’s recommendation.

Despite Davel’s clarification last week, there remains a legal view that Mpahlwa does not have the right to raise the usury rate until the National Credit Act comes into play in June next year.

There is also debate as to whether loans taken out before June 1 will be subject to the present rate or the higher rate retailers will be able to charge after that date.

The confusion has not been helpful to credit retailers, many of which were also subject to the department of trade and industry’s decision to give clothing retailers only one month to find new suppliers following the imposition of quotas limiting the importation of Chinese made clothing. The department backtracked on that blunder, extending the time period to more than three months.

But even more interesting is the debate as to whether a higher usury rate will cool off consumer debt, already at record levels.

Edgars Consolidated Stores (Edcon) is of the view that recent interest rate hikes have done nothing to dampen spending at the bottom end of the market because clothing and furniture loans are not subject to interest rate hikes. Home and car loans are subject to rate hikes but most customers at Edcon’s mass market Jet chain can’t afford to pay off houses and cars.

The usury rate, the upper limit at which retailers may lend money, has been fixed at 20 percent, despite three interest rate hikes.

But regulator Davel believes that far from cooling off consumer debt, already at record levels, a usury rate hike will in fact stimulate more spending. Presumably he believes that if credit retailers are able to charge a higher usury rate, they will take on new, riskier clients.”