Treasury proposals on debt control approved

Tough measures on debt approved by cabinet….

squeeze To counter what is feared in some quarters as a minor debt “bubble”, as occurred in the United States and set of a major run on banks, National Treasury have had approved by cabinet tough proposed measures to assist over-indebted households and prevent consumers from becoming over-indebted in future.

A number of ministers have supported Pravin Gordhan’s observations, stated in his Medium Term Budget Statement, that the curbing of reckless lending is a priority for government. Growing debt issues in middle to lower income groups has been an issue with rating agencies.

Over-debtedness the issue

Despite fierce opposition to a credit amnesty earlier, which was perceived as simply contributing to such a “bubble”, the measures that were approved by cabinet recently include an “immediate set of comprehensive steps” to tackle over-indebtedness in lower and middle income situations.

Such measures include insisting on affordability criteria in place for retail lenders and prohibiting reckless loans; ensuring that the provision of credit is suitable for each circumstance and reviewing National Credit Act pricing caps; there will be a “strengthening of regulation and enforcement to prevent unregistered credit providers and a review the regulatory framework for credit insurance policies.

The expression “controlling access to the payment system” was used.

Whole household approach considered

Government is also considering providing assistance to households labouring under a debt burden. No details emerged on this particular issue but some of the proposed measures included steps include reducing borrowers’ installment burdens; the setting up of voluntary debt relief measures within major lenders and regulating debt-collection firms.

Most importantly, employers will also be encouraged to investigate the legitimacy of all emolument attachment or garnishee orders in force against their employees. Treasury says such measures will be implemented within the public sector early next year; the department of trade and industry working with Treasury.

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