Early signs of an NCA impact.

[Eugene]

Duncan - I had a look at a couple of the bank's credit agreements and it is obvious that the slack of R10800 is very manipulative as one can play around and not declare all your expenses. This would be all fair and well in order to have the loan granted and IF you regulary pay your monthly instalment. The concern might creep in where you find yourself in a tight fix down the line and wanting to re-schedule (debt review) or by the off-chance to be declared over-indebted. THEN you might sit with a scenario where the credit provider issue the defence that you have not declared all your income and expenditure and you may not rely on the protection of the NCA (debt review or being over-indebted).

[duncan drennan]

Yes, I thought it was quite extreme, and pretty much allows for a zero leveraging of debt, but interesting nonetheless.

THEN you might sit with a scenario where the credit provider issue the defence that you have not declared all your income and expenditure and you may not rely on the protection of the NCA (debt review or being over-indebted).

So is it all purely trust based? The banks etc. expect that the client will declare everything to them reasonably reliably? Surely this is quite open to manipulation in many ways. What if I decided to have an extra-lean month, and made sure my expenses were as low as possible, maybe shuffle around some things to get what, for the month of entering into the agreement, looks like a very good income-to-debt ratio. Then after the credit is granted go back to normal. Would I be able to say that that was "valid" for the month I applied?

All smoke and mirrors really. If people manipulate the system to get what they want and it bites them in the ass, then it is pretty much the same as before. If they play by the rules there is little room for gearing and so forth.

[Eugene]

A consumer is obliged when applying for any form of credit to fully and truthfully answer any request for information by the credit provider. Failure to do that may serve as a complete defence against allegations of reckless credit by a credit provider especially where a court finds that this materially affected the credit provider's ability to make a proper assessment. (Sec 81 (4))

[Eugene]

I agree that in essence it is basically the same as before, only now it has been codified in such a manner that everyone has to reach for an Oxford dictionary to understand what the legislature accually meant when writing the NCA.

[Dave A]

Here's a thought - It's pretty easy to prove you've "got the slack" if you were paying it in rent beforehand anyway. You're replacing one expense with another.

A bit more feedback along the "early signs" and "property" themes. I'm hearing that the problem area in getting finance is in the < R600k bracket in the greater Durban area. Above that there doesnt seem to be too much trouble. Obviously a very complicated mix of factors that lead to this - but kinda interesting that access to credit is biting at the lower end of the market.

Wasn't the idea to improve fair access to credit? (And here I think that noble thought was targetting the lower end of the market).

[duncan drennan]

Wasn't the idea to improve fair access to credit? (And here I think that noble thought was targetting the lower end of the market).

Was it to improve fair access to credit, or to avoid the lower end getting over indebted?

[Dave A]

A bit of both, I think. The stated purpose of the National Credit Act is here.

[duncan drennan]

Difficult to say, but I wonder if this is possibly linked to the NCA?

JOHANNESBURG (Reuters) - South African retail sales growth slowed to 6.4 percent year-on-year in June at constant prices, compared to an upwardly revised 9.2 percent in May, Statistics South Africa said on Wednesday.

In the three months to the end of June, retail sales -- the main measure of consumer demand -- increased by 7.2 percent compared to the same period the previous year, also at constant prices.

Article from MoneyWeb

My wife was telling me about a conversation she overheard regarding the NCA. Group of people were discussing the "new credit act" and that it means that it is more difficult for people with a lower income ("like us") to get credit, while the rich people can still easily get it. They also mentioned that the sales people from Bears can't make target (which I'm guessing means that most sales people's paychecks just took a knock for the worse).

[Eugene]

Most sales people in the retail industry work for a very small basic salary (if you can call it that) together with commissions. I spoke to a couple of salespeople and the overall scenario was that they are under immence pressure as in most contract there is a performance clause that if they don't make target, they forfeit a portion of their ever so small basic salary.

[Dave A]

Something a little more qualitative than the feedback I've been getting on the lower end of the property market:

First-time home buyers and people targeting the lower end of the suburban property spectrum may find themselves squeezed out of the market by higher mortgage rates and the requirements of the National Credit Act (NCA), implemented in June.

Early signs of this trend came from a survey of estate agents, the First National Bank (FNB) Property Barometer for the second quarter, released yesterday.

The lower end is defined by estate agents, but John Loos, an FNB property strategist, said that in the context of the survey, it would include houses worth less than R600 000. To afford a bond for R600 000, a borrower would need to earn at least R24 000 a month.

The second-quarter survey was supplemented by a survey last month to measure the impact of the NCA. Loos reported a "significant weakening … The percentage of first-time buyers in the market dropped to 16 percent in July from 20 percent in the second quarter. And 43 percent of respondents claim that applicants are struggling to qualify for home loans."
full story from Business Report here