South Africa’s National Credit Regulator must be taken to task for its failure to properly investigate African Bank for its reckless lending practices that have left the bank with an R8.5 billion financial gap.
Founder of The Debt Counselling Industry Portal, the DCI.co.za and registered Debt Counsellor, Deborah Solomon said African Bank’s need to raise R8,5 billion in new capital due to unsecured loans turning bad was not surprising following the NCR’s finding of reckless lending last year when one of the bank’s branches was fined R20 million for breaking the reckless lending provision of the National Credit Act.
Solomon said debt counsellors had now received reliable information showing that the regulator had “seriously erred” in not launching a full-scale investigation into the lending practices of the bank’s 630 branches around the country at the time.
“The reduction of the proposed R300 million fine of African Bank to just R20 million was also not acceptable and amounted to a slap on the wrist,” she said.
“Over the past few years, Debt counsellors have lodged thousands of complaints, many relating to reckless lending and breach’s against the NCA against the country’s major credit providers, including African Bank.
These complaints have repeatedly been sent to the Regulator who has chosen to ignore them and the plight of desperate consumers.”
“We are calling on the government to launch a high level investigation into the office of the NCR to establish exactly why the regulator is not doing its job properly,” Solomon said.
“Apartheid ended 20 years ago but the devastation of debt slavery that forms the backbone of this country’s banking system has stubbornly survived to burden consumers of all races and class with unfair and reckless lending practices,” Solomon said.
“Why is it that our SA banks are allowed to thrive on a model that stays afloat relying on credit granting, including wide-scale unsecured loans to consumers who often can’t afford to repay these loans? We should rather follow overseas models where banks rely on investments and savings to sustain a healthy financial sector.”
Solomon said credit providers persisted with the use of archaic collection methods, such as garnishee orders, hundreds of which were illegally granted, by bypassing the requirements of the NCA on consumers who were not financially literate or who are dealt with in another language other than their home language.
“Sadly, in the midst of the illegal activity by credit providers, the consumer credit crisis and this bubble that has burst at African Bank, the NCR has remained the silent spectator as millions of consumers are financially ruined and their lives devastated. Reckless lending is having a devastating effect on millions of consumers and in the worst heart breaking cases has led to suicides, leaving families destitute and without their bread winners,” Solomon said.
“The National Credit Regulator is an accessory to the devastation that has occurred for millions of consumers as their only function has only ever been to enforce and uphold the National Credit Act, both of which they have sadly failed.”
Solomon said it appeared that African Bank relied on continued cash injections for its survival, which is exactly how a pyramid scheme survives.
“Is African Bank’s business model perhaps relying on a pyramid scheme where it requires repeated loans for new investors to sustain itself? What will happen if the bank does not get more investors this time around? Is African bank still solvent?”
Solomon said banks should be transparent to investors as well as the Regulator and be forced to list the percentage of unsecured financial loans under Debt Review, loans whereby Judgments have been taken, loans whereby Garnishee Orders are used as a collection method, loans that are under Administration Orders and loans that have been placed into Sequestration in their financial records and statements.
If these breakdowns were provided for, it would provide far better insight into the true state of any credit provider and their debtor’s book.
“African Bank’s present woes serve as a wake up call to the entire credit industry in the country that the current model of relying on credit to stay afloat is not sustainable and that urgent intervention is needed to transform the entire banking sector.
We have been stating obvious facts in the press for the past two and a half years, it’s sad for our entire economy and millions of affected consumers that our warnings were not taken seriously. Looking at facts, it’s time for the Regulator to now be held accountable,” Solomon said.
For more information contact:
Registered Debt Councilor