Impact of the regulation of unsecured credit on consumers: an analysis of the National Credit Act 34 of 2005 and its regulations.
Date
2018
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Abstract
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.
Description
Masters Degree. University of KwaZulu-Natal, Durban.