Abstract
One of the main aims of the National Credit Act (NCA) of 2005 in South Africa is to curtail rising consumer over-indebtedness by encouraging credit providers to adopt responsible lending practices. This research study seeks to ascertain whether the NCA’s responsible lending requirements have limited reckless lending by credit providers. Data are collected by a telephonic survey amongst debt counselors and in-depth interviews amongst bank employees. Descriptive statistics are used to analyze data from the descriptive survey, while data from in-depth interviews are analyzed using the thematic approach. Credit providers have divided opinions on whether the NCA limits reckless lending practices. Debt counselors claimed that credit providers are lending irresponsibly. By contrast, insights obtained from bank employees indicate compliance. However, both agree that borrowers are not borrowing responsibly. As a result, consumer education is required to educate consumers on both the benefits and risks of borrowing. It is also recommended that lenders be audited for compliance to the Credit act.
Highlights
Data are collected by a telephonic survey amongst debt counselors and in-depth interviews amongst bank employees
A number of countries including South Africa, Australia, European Union, North America and New Zealand have been concerned about the rapid rise in consumer borrowing leading to over-indebtedness (Kempson, 2008)
If the agreement entered into after conducting the required assessments by the credit provider failed to ensure that the consumer understood the risks, costs and obligations of the agreement; and if credit is extended when the assessed showed that, the credit agreement will render the consumer over-indebted
Summary
A number of countries including South Africa, Australia, European Union, North America and New Zealand have been concerned about the rapid rise in consumer borrowing leading to over-indebtedness (Kempson, 2008). In line with this trend, South Africa introduced responsible lending principles through the enactment of the South African National Credit Act (NCA). One of the main objectives of the NCA was to curtail reckless lending and rising consumer over-indebtedness by encouraging credit providers to adopt responsible lending practices (Vessio, 2009). Stephen Migiro, Professor, Graduate School of Business & Leadership, University of KwaZulu Natal, South Africa
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
