Impact of the regulation of unsecured credit on consumers: an analysis of the National Credit Act 34 of 2005 and its regulations.
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In 2012, the National Credit Regulator (hereinafter the ‘NCR’), in its annual report, published a warning on the granting of unsecured credit, stating that the year saw an ‘unprecedented growth’ in the unsecured lending market. The aforementioned report noted an above average growth of 13,77 per cent over the course of the year.1 Furthermore, the report contended that although unsecured credit was a vital part of the South African credit market, it was not impervious to reckless lending and abusive practices.2 The NCR’s warnings proved true in August 2012 when, due to calls for increased wages, violence erupted at a Rustenburg platinum mine that lead to the death of thirty-four miners. It was subsequently revealed that high levels of debt as a result of unsecured credit was to be blamed for the ‘Marikana Massacre’.3 Consequently, petitions were drafted for increased regulation, especially pertaining to unsecured credit and lending practices. In 2015, caps on interest and other fees applicable to various credit transactions were introduced to curb reckless lending.4 Although viewed by many as a safeguard for consumers, arguments have been put forward that the increased regulations and more stringent lending criteria have, in fact, reduced access to credit, especially to lower-income consumers.5 This dissertation will analyse whether the National Credit Act 34 of 2005 (hereinafter ‘the NCA’) and its regulations have impacted positively or negatively on consumers in relation to unsecured credit. Chapter 1 provides a contextual understanding for the dissertation, providing background to the research question, its rationale and methodology. To ensure the historical landscape of this research paper is understood, Chapter 2 examines the history of credit legislation in South Africa leading up to the implementation of the NCA and will explore the concept and history of unsecured credit. Chapter 3 provides an in-depth analysis of the present credit legislation by analysing legislation, statistics and case law. This analysis is necessary to ascertain strengths or weaknesses of the current credit regime. In order to identify recommendations that can be applied to our jurisdiction, Chapter 4 seeks to provide a comparative international perspective on existing credit legislation by comparing South Africa, India and the United Kingdom. Finally, Chapter 5 comprises of recommendations and a conclusion of the research questions.