Cape Town: Minister of Trade and Industry Rob Davies has warned micro-lenders involved in illegal activities that the National Credit Regulator (NCR) will bring them to book, after the regulator uncovered widespread abuse by at least 10 micro-lenders in Marikana.
These abuses included charging of exorbitant interest rates, holding consumers’ bank cards and IDs and not running credit checks on consumers before advancing credit to them.
Davies told a media briefing in Parliament on Thursday that the NCR was investigating micro-lenders in various mining communities across the country and that it also intended to hold a dialogue with the other regulators in the financial sector over unsecured credit.
“The message to anyone engaged in these practices is that you are taking a risk because yes, we are after you,” he said, adding that micro-lenders were “outright preying on the vulnerabilities of working people”.
The NCR found that two out of 12 micro-lenders in Marikana that it visited were fully compliant.
The remaining 10 were not compliant with the National Credit Act as they weren’t conducting affordability assessments or were charging excessive interest rates while many of them were holding consumers’ bank cards.
The regulator worked with the police and a number of micro-lenders found in possession of consumer’s bank cards and IDs have been arrested, while others would be referred to the National Consumer Tribunal.
Davies said the credit agreements Marikana miners and residents had taken out were not “normal credit agreements” because they covered current consumption, which ate into people’s salaries.
“If someone gets R9 000 they are probably be taking home R2 000 or R3 000… because the rest is going on debt servicing,” he said.
He said reckless lending had a negative effect on people and the community.
“People are being enticed into taking loans under difficult circumstances and those loans don’t solve their financial problems, they actually worsen them and I don’t think it’s just in Marikana,” said Davies.
Nomsa Motshegare, the chief operations officer at the NCR, said her office had first learned about the allegations around Marikana micro-lenders, in media reports.
Those in Marikana that are being targeted for unsecured credit earn between R3 500 and R15 000, she said.
Motshegare said a public education campaign would also be run to educate South Africans about micro-lending practices.
Under the National Credit Act, the maximum interest rate credit lenders can charge is 31% per annum.
Motshegare said credit impairments had been growing year-on-year and currently, 49% of the R1 trillion in credit lent out was impaired.
She said unsecured lending made up nine percent of total consumer debt.
Consumers were getting more in debt every year, but more unsecured lending was also being advanced, amid rising food and fuel costs, she said.
NCR company secretary Thulisile Mashaba said in those cases where consumers had been charged exorbitant interest rates, the regulator would refer them to the National Consumer Tribunal.
The tribunal could then make a ruling that the micro-lender refund the portion of the interest rate on which the consumer was being overcharged.