He said the NCR had received delegations not only from Namibia, but Botswana, China, Mongolia and also the possibly more credible European Coalition for Responsible Credit (ECRC), wanting to learn about the Act.
The local press reported, not very loudly, that on November 12 Setou traveled to London to address a two-day conference hosted by the ECRC, a powerful coalition of non-profit organizations whose main objective is to “press western European governments to adopt legislation that encourages responsible credit granting.”
The NCA; a possible beginning of a separation of collecting and spending, state and finance and a foundation for ‘responsible credit granting’
The NCA was drafted in the light of common cause that the current global financial crisis is partly due to weak regulation of the world's richest economy, the US financial system and its propesity toward greed.
The function of the NCR in South Africa is to provide teeth in the regulation of the local credit industry - which has an estimated value of more than R1.1 trillion - “by keeping a watchful eye on it”.
After the introduction of the Act in June last year the general reaction was expected. Most financial regulations are drafted to protect consumers from greed but often seen as interference by the state: car dealers, for instance and estate agents complained that the legislation was depressing sales as banks, under the new Act, were approving fewer loans.
They had to: The Act put the credit approval process into a more financially comfortable place for you the consumer before bottom line profit.
In the past, you could buy a house if your monthly repayments were not more than 30% of your monthly salary.
But that proviso – and that’s all it was, a guideline - did not take into consideration other, newer and it now appears, sometimes more dangerous credit traps: Credit cards and, yes, looking at South African university campuses today, even student loans.
The new legislation simply made it mandatory for banks to take a very much closer look at what other financial obligations people were exposed to before exposing them to more debt.
The Act takes into account your total disposable income – credit card payments, car loan repayments and shopping accounts- before approving a housing mortgage.
Naturally, the housing market became temporarily ‘depressed’ but I think its essential and traditional value remains; it’s just not the time to sell - at least until global markets stabilize.
In other words, the Act mandated the banks to be sure that you could pay them back, unlike the sub prime lending banks in the US, which makes this South African legislation possibly unique in a world regulated by profit over people.
The Act also introduced into law debt counseling for already over-extended borrowers.
First National Bank spokesperson Xolisa Vapi put it this way: "The South African banking system has effectively been insulated from the global financial crisis mainly as a result of the prevailing exchange control regulations.”
"Having said that, the Act has had its benefits for us in that it has improved the way we look at a customer before granting credit.”
