In a discussion document presented to Parliament on Tuesday, MacDonald Netshitenzhe, acting deputy director general at the consumer and corporate division of the DTI, said the National Credit Act currently makes no provision for the minister to provide any debt relief in specific circumstances.
The DTI’s input came after the portfolio committee last year held a number of deliberations on the debt situation in South Africa, following a decision taken earlier in the year to gain input from the public on the possibility of debt forgiveness.
The department recommended that certain criteria be developed under which retrenched consumers, victims of unlawful grant deductions as well as those who fall prey to reckless lending may qualify for debt relief.
During public hearings last year, banks and other credit providers cautioned against legislated debt relief measures, although the stakeholders agreed that the debt counselling rules system needs to be refined, specifically to make provision for low-income consumers.
Trade unions and consumer protection bodies, on the other hand, came out in support of debt relief for retrenched consumers with no income and/or insufficient credit life insurance to pay off their debt.
In its discussion document, the DTI cited a number of examples of debt forgiveness in other countries, such as:
- The “Fresh Start” scheme in Croatia for low-income consumers with no property and no savings. Municipalities, utility and telecommunication service providers, tax authorities and banks had to clear some of these consumers’ debts and absorb the losses themselves.
- The “Debt Waiver and Relief” scheme in India for over-indebted rural farmers. Indian farmers pledged their land as collateral to qualify for either conditional or full debt relief, and the government recapitalised the loans written off for the full amount.
- In New Zealand, England and Wales there were interventions where debtors unable to pay their debt received relief in instances where their liabilities, assets and monthly and discretionary income fell under a prescribed threshold. The debt relief measures, however, were subject to certain restrictions that related to the debtor’s behaviour. Debts were discharged when debtors adhered to all the requirements set out in the relief programme.