CONSUMER CREDIT REGULATION IN NAMIBIA – Project topics materials

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Background

Namibia has recorded a progressive increase in consumer credit over the years, as is reflected by the profile of active credit consumers and the value of credit extended to consumers.The increase in consumer credit has been largely attributed to the growing rise in bank credit extended to consumers, as well as to the rapidly-growing micro-lending industry which provides credit services to low and no income consumers. Consequently, the Bank of Namibia on numerous occasions has expressed concern over the continued growth in consumer credit, remarking that a large portion of the credit extended to consumers tends to be unproductive and increases the debt burden and servicing costs of consumers.

Thesis Statement

The broad problem statement of this thesis is critically to examine the adequacy of the primary debt prevention measures under the Namibian consumer credit legislation, more particularly, the Credit Agreements Act 75 of 1980 and the Usury Act 73 of 1968, in protecting consumers from irresponsible credit granting and over-indebtedness and, accordingly, to make proposals for legal reforms appropriate in the present and future economic and social contexts of Namibia.

Thesis Statement Defined

Renke proposes a classification of debt prevention measures into primary and secondary measures in respect of consumer credit legislation. 19 This classification is adopted in this thesis. Primary debt prevention measures denote measures
(a) enacted with an explicit aim to prevent reckless credit granting and over indebtedness, including for instance an assessment of the consumer’s creditworthiness;
(b) restricting the total of the consumer’s eventual debt burden, for instance interest rate caps or any other measures limiting the cost of credit; and
(c) protecting the consumer in respect of the accumulation of debt after the particular credit agreement has been entered into.

Research Methodology

The research method adopted in this study to gather the necessary data consisted of a literature review and an analysis of relevant legislation and court decisions which relate to the objectives of this study. A theoretical approach that helps provide a normative framework and a detailed exposition of the existing law as interpreted by the courts is adopted. This study provides a narrative background of the credit law framework in Namibia in relation to the evident explosive growth in consumer over indebtedness.

CHAPTER 1: INTRODUCTION
1.1 Background
1.2 Thesis Statement
1.3 Thesis Statement Defined
1.4 Research Objectives
1.5 Research Methodology
1.6 Delineations and Study Limitations
1.7 Organisation of Chapters
1.8 Terminology and Reference Methods
CHAPTER 2: RESPONSIBLE LENDING POLICY
2.1 Introduction
2.2 Theoretical Perspectives Underlying Responsible Lending Policy
2.3 Criticisms of Responsible Lending Policy
2.3.1 General
2.3.2 Responsible Lending is Paternalistic
2.3.3 Financial Responsibility Shifts to the Credit Provider
2.3.4 Responsible Lending Leads to Restrictive Lending Practices
2.3.5 Over-reliance on Credit Bureaus for Creditworthiness Assessments
2.3.6 Responsible Lending Conflicts with Standardised Models of Credit Scoring
2.4 International Efforts to Promote Responsible Lending
2.4.1 General
2.4.2 The Group of Twenty
2.4.3 The Organisation for Economic Co-operation and Development
2.4.4 The World Bank
2.5 Wilson’s Criteria for an Effective Responsible Lending Regime
2.6 Responsible Lending Policies in Particular Credit Markets
2.6.1 General
2.6.2 The United States of America
2.6.3 The European Union
2.6.3.1 The Directive 2008/48/EC
2.6.3.2 The Directive 2014/17/EU
2.6.4 South Africa
2.6.5 Australia
2.7 Conclusion
CHAPTER 3: CONSUMER CREDIT REGULATION IN NAMIBIA
3.1 Introduction
3.2 An Overview of the Namibian Financial System
3.2.1 General
3.2.2 The Consumer Credit Market
3.3 The Namibian Consumer Credit Legislative Framework
3.3.1 General
3.3.2 The Usury Act
3.3.2.1 General
3.3.2.2 The Scope of Application
3.3.2.3 Debt Prevention Measures in terms of the Usury Act
3.3.2.3.1 Finance Charges on the Principal Debt
3.3.2.3.2 The Prescribed Interest Rate Ceilings
3.3.2.4 An Evaluation of the Usury Act
3.3.2.4.1 Scope of Application
3.3.2.4.2 Debt Prevention Measures
3.3.3 The Credit Agreements Act
3.3.3.1 General
3.3.3.2 The Scope of Application
3.3.3.3 Debt Prevention Measures in terms of the Credit Agreements Act
3.3.3.3.1 The Maximum Repayment Period
3.3.3.3.2 The Minimum Deposit
3.3.3.4 An Evaluation of the Credit Agreements Act
3.3.3.4.1 Scope of Application
3.3.3.4.2 Debt Prevention Measures
3.3.4 The Sale of Land Act
3.3.4.1 General
3.3.4.2 Scope of Application
3.3.4.3 Debt Prevention Measures in terms of the Sale of Land Act
3.3.4.4 An Evaluation of the Sale of Land Act
3.3.4.4.1 Scope of Application
3.3.4.4.2 Debt Prevention Measures
3.3.5 An Evaluation of the Namibian Consumer Credit Legislative Framework
in light of Leading International Best Principles
3.4 Non-Binding Standards: The Banking Code
3.5 Current Proposals for Legal Reforms in Namibia
3.5.1 General
3.5.2 The Microlending Bill
3.6 Conclusion
CHAPTER 4: THE SOUTH AFRICAN RESPONSIBLE LENDING REGIME
4.1 Introduction
4.2 The NCA: Scope of Application
4.2.1 General
4.2.2 Credit Agreements
4.2.3 Classification of Credit Agreements
4.2.4 Credit Agreements Specifically or Indirectly Excluded
4.3 Regulatory Bodies in terms of the NCA
4.4 The Responsible Lending Provisions in terms of the NCA
4.4.1 General
4.4.2 Application of Part D of Chapter 4
4.4.3 Consumer Over-indebtedness in terms of the NCA
4.4.4 The Prevention of Reckless Credit in terms of the NCA
4.4.4.1 General
4.4.4.2 The Credit Provider’s Pre-Agreement Assessment Obligation
4.4.4.2.1 The Consumer’s General Understanding of the Credit
4.4.4.2.2 The Affordability Assessment
4.4.4.3 The Consumer’s Information Duty
4.4.4.4 The Pre-Agreement Assessment Procedure
4.4.4.5 Regulation 23A
4.4.4.5.1 General
4.4.4.5.2 The Assessment Procedure as Prescribed by Regulation 23A
4.4.4.6 The Courts’ Interpretation of the Pre-Agreement Assessment Provisions
4.4.4.6.1 General
4.4.4.6.2 ABSA Bank Ltd v Kganakga
4.4.4.6.3 ABSA Bank Ltd v De Beer and Others
4.4.4.7 The Instances of Reckless Credit Lending
4.4.4.8 The Powers of the Courts or the Tribunal with Regard to Reckless Credit
4.4.4.9 A Practical Consideration of the Section 83 Orders
4.4.4.9.1 General
4.4.4.9.2 The Court Order Setting Aside the Consumer’s Rights and Obligations
4.4.4.9.3 The Order Suspending the Force and Effect of the Reckless Credit Agreement
4.4.4.10 Other Sanctions for Reckless Credit Lending
4.4.5 The Credit Provider’s Duty to Provide Pre-Contractual Information
4.4.5.1 General
4.4.5.2 The Pre-Agreement Statements and Quotations
4.5 Conclusion
CHAPTER 5: THE AUSTRALIAN RESPONSIBLE LENDING REGIME
5.1 Introduction
5.2 The NCCPA: Scope of Application
5.2.1 General
5.2.2 Credit Agreements Specifically Excluded
5.2.3 Licensing Requirements
5.2.4 The Classification of Credit Licensees
5.2.5 The Consumer Credit Regulator
5.3 The Responsible Lending Provisions in terms of the NCCPA
5.3.1 General
5.3.2 The Credit Licensee’s Pre-Agreement Assessment Obligations
5.3.2.1 General
5.3.2.2 The Credit Assistance Licensee’s Pre-Agreement Assessment Obligations
5.3.2.3 The Credit Provider’s Pre-Agreement Assessment Obligations
5.3.2.4 Pre-Agreement Assessment Obligations Relating to Consumer Leases
5.3.2.5 The Consumer’s Information Duty
5.3.3 A Practical Consideration of the Suitability Requirements
5.3.3.1 General
5.3.3.2 The Expression “It Is Likely”
5.3.3.3 The Concept of Substantial Hardship
5.3.3.4 ASIC’s Guidance in Conducting the Required Assessments
5.3.3.4.1 General
5.3.3.4.2 Reasonable Inquiries about the Consumer’s Requirements and Objectives
5.3.3.4.3 Reasonable Enquiries about the Consumer’s Financial Situation
5.3.3.4.4 Verification of Information Provided by the Consumer
5.3.3.4.5 Assessing the Consumer’s Ability to Meet the Financial Obligations of a Credit Contract
5.3.3.4.6 Providing a Written Assessment to the Consumer
5.3.3.5 Guidance from Case Law
5.3.3.5.1 General
5.3.3.5.2 ASIC v The Cash Store
5.3.3.5.3 Make It Mine Finance Pty Ltd
5.3.4 The Credit Licensee’s Duty to Provide Pre-Agreement Information
5.3.4.1 General
5.3.4.2 Division 2 of Part 3-2 of the NCCPA
5.3.4.3 Division 1 of Part 2 of the NCC
5.3.4.4 The Duty to Provide Pre-Agreement Information Relating to Consumer Leases
5.3.4.4.1 General
5.3.4.4.2 The Credit Assistance Provider’s Duty to Provide Pre Agreement Information
5.3.4.4.3 The Credit Provider’s Duty to Provide Pre-Agreement Information
5.3.4.5 Non-Compliance with the Duty to Provide Pre-Agreement Information
5.3.5 Additional Responsible Lending Obligations In Respect of Particular Types of Credit Agreements
5.3.5.1 General
5.3.5.2 Standard Home Loans
5.3.5.2.1 General
5.3.5.2.2 The Duty to Provide Pre-Agreement Information
5.3.5.3 Credit Card Contracts
5.3.5.3.1 General
5.3.5.3.2 The Duty to Provide Pre-Agreement Information
5.3.5.3.3 The Exposure Draft Bill
5.3.5.4 Small Amount Credit Contracts
5.3.5.4.1 General
5.3.5.4.2 The Additional Pre-Agreement Assessment Duty
5.3.5.5 Reverse Mortgages
5.3.5.5.1 General
5.3.5.5.2 The Duty to Provide Pre-Agreement Information
5.3.6 Non-Compliance with the Responsible Lending Obligations
5.3.6.1 General
5.3.6.2 The Powers of the Courts
5.3.6.2.1 General
5.3.6.2.2 The Civil Financial Penalties
5.3.6.2.3 The Injunctions
5.3.6.2.4 Compensatory Orders
5.3.6.2.5 Other Compensatory Orders
5.3.6.2.6 Criminal Sanctions
5.4 Conclusion
CHAPTER 6: CONCLUSION AND RECOMMENDATIONS
6.1 Introduction
6.2 General Conclusions
6.2.1 Leading International Best Principles in Responsible Lending
6.2.2 Namibian Consumer Credit Legislation
6.2.2.1 Scope of Application
6.2.2.2 The Debt Prevention Measures under Namibian Consumer Credit
Legislation
6.3 Recommendations for Legal Reform
6.4 Concluding Remarks
BIBLIOGRAPHY