A question we all should be asking ourselves - does the introduction of the National Credit Act have an impact on our business?
Up until now, much of the interest has been around questions like:
- Do we need to register as a credit provider?
- Do we need to change our contracts?
- Do we need to change our credit granting processes?
- Does the process of collecting debt change?
I'd like to suggest there is a distinct possibility that whilst your business might not be affected directly by the regulatory changes, the NCA could still have a significant impact on your business.
Consider, for a moment, that up until now financial institutions have been reasonably comfortable granting credit because at the end of the day they know that the debtor (or some individual) is so tied up in fine print, the credit provider owns them until the day they've paid up. Banks in particular have been in a no lose position. When it comes to granting credit to individuals, this is no longer the case. Perhaps they are going to be a little more circumspect as to who they are going to provide credit to.
I'd like to suggest that they might be a lot more circumspect.
Given banking's traditional belt and braces approach to lending credit, I strongly suspect that the wriggle room provided by the NCA for over-indebted individuals means the banks are going to be pretty wary.
There is also another factor that is going to come into play. It should now, in theory anyway, be pretty easy for a credit provider to establish the total debt burden of any individual through the national credit database. Up until now the bank has only known what an individual has as debt (and potential debt) with them, with only a vague idea of what might be owing elsewhere. And I've got a sneaking suspicion that once the spread is added up, and particularly once the potential debt is factored in, there are going to be some pretty surprised faces.
Maybe surprised is the wrong word, more like a lifted eyebrow. Because, after all, they still own you and everything you own, or may own or earn, until the day you pay.
Except for new debt after 1 June.
Consider, for a moment, that we now go through a stage of mass credit application refusals as banks gently ease into this new dispensation. How dependent is your business on private individuals being able to access credit?
Car dealers and estate agents come to mind. Highly dependent on their clients getting finance for their products. And I'm sure that there a plethora of businesses around those industries that are going to be affected by a change too.
Of course, all will be revealed by statistics in time. Some adjustments will be made and we'll drift towards a new equilibrium. But the problem with statistics is that they tend to become available a fair while after the fact. And sometimes by then the horse has bolted. Whilst the effect of a shock wave might disipate after a while, it still does not prevent the shock wave from doing significant damage.
But perhaps we can get some sort of idea faster than waiting for the stats.
The simple indicator would be - How are credit application approvals going in the motor vehicle and real estate industries since 1 June?
So I was wondering. If you are a car dealer or estate agent, or perhaps you know an estate agent or car dealer and get the opportunity to ask - take a moment to answer (or get an answer) to this question...
Any noticeable change in credit approval rates lately?
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