National Credit Act practical implementation

[Dave A]

Hi Rebel. I certainly don't disagree with your points, except for this:

These are the people that shouldn't be getting credit anyway, right? Is this a pain? Or is the NCA actually succeeding in achieving one of its objectives?

Hey !!! credit makes the wheels of business turn NOT cash !!! Wrong on your side - The NCA stopped the right people getting credit and also the people who did not qualify - so we end up with little credit being granted and that removes the oil from business.

I disagree on two fronts:

credit makes the wheels of business turn NOT cash

I'm having a hard time imagining things more poisonous to a business than debtors that don't pay. Credit and debt don't kill businesses - cash flow does.

The NCA stopped the right people getting credit

Absolutely not - the GFM stopped the right people getting credit. I doubt there'd be any problem with the "right" people getting all the credit they qualifiy for if it wasn't for the global shortage of funds for credit finance.

And what caused the GFM? Essentially extending reckless credit - finance for people who couldn't pay their due!!

Don't be fooled - cash is the core. Credit only affects timing of when the cash is due, thereby leveraging the results, be it gainful reward or painful misery.

[Rebel]

Dave I hear you - Debtors who do not pay sink a business. We are debating on the NCA and my point is: the way Reckless Credit Granting is viewed scares a lot of businesess granting credit to consumers - even to consumers who qualified in the past (pre 2007). Assets was used to gear on - now you need to show you can service the debt with your income hence we lost some 1.8 million household from the credit market - not that we have a lot in the first place. SA has some 18 mil credit active people - half has bad credit records so we depend on few to make the economy work. from the 9 mil good debtors we know that 60% earns below R 2,195 per month so how much credit can they take up ?

Your second point - do you think we were actually part of the credit crunch and shortage of money supply - have a chat to the likes of the big fund masnagers and you will hear that they and the 4 big banks have more money to loan to you than what you can take up. Challenge is the NCA

[Dave A]

the way Reckless Credit Granting is viewed scares a lot of businesess granting credit to consumers

I'll concede that one

Your second point - do you think we were actually part of the credit crunch and shortage of money supply

In short, yes.

have a chat to the likes of the big fund masnagers and you will hear that they and the 4 big banks have more money to loan to you than what you can take up. Challenge is the NCA

Looking forward to that next interest rate drop then

Glad to hear the big fund managers (I'm thinking of one in particular where I got passed from pillar to post for five months for payment) have turned their cashflow problems around.

If they're sitting on excess funds, it's relatively recent. SA is currently experiencing a (possibly excessive, looking at the exchange rate) capital inflow again...

Don't take my word for it - Ask any active estate agent what they've been finding since the GFM.

But that aside, we were talking about the impact of the NCA on overall credit extension. weren't we? Here's a thought:

Banks don't make money by sitting on it. It has to be deployed (read loaned out) for it to start working for them. I'd suggest NCA or not, the chief driver of what is made available for credit extension is what is available to be loaned.

[Rebel]

I'll concede that one

In short, yes.

Looking forward to that next interest rate drop then

Glad to hear the big fund managers (I'm thinking of one in particular where I got passed from pillar to post for five months for payment) have turned their cashflow problems around.

If they're sitting on excess funds, it's relatively recent. SA is currently experiencing a (possibly excessive, looking at the exchange rate) capital inflow again...

Don't take my word for it - Ask any active estate agent what they've been finding since the GFM.

But that aside, we were talking about the impact of the NCA on overall credit extension. weren't we? Here's a thought:

Banks don't make money by sitting on it. It has to be deployed (read loaned out) for it to start working for them. I'd suggest NCA or not, the chief driver of what is made available for credit extension is what is available to be loaned.

Banks and funds do have the funds - NCA is the drawback - In the past consumers got 110% bonds now down to 80% if you are lucky - where does people get 20-40% deposit ?(which they in the past did not need !)

My clients (the banks) would like that money in the vault to work - you are 101% correct but reckless credit carries a hefty R1 mil fine tag. Another thing consumers do take up credit and then go under debt review and try to get an order for reckless credit - another reason for the banks NOT TO RISK too much.

How about this one : Debt Counsellor to consumer: how old is your car? Consumer: 4 years. Debt Counsellor: man considder buying a new one and then we place you under debt review. That old car will not last untill your debt review is over.

[Dave A]

How about this one : Debt Counsellor to consumer: how old is your car? Consumer: 4 years. Debt Counsellor: man considder buying a new one and then we place you under debt review. That old car will not last untill your debt review is over.

Shocking and interesting.

If the client is on the verge of debt review, what are the chances of them getting finance if they complete their credit application honestly?

And even if the applicant isn't entirely honest in their application, the bank is still in the cart

But at least the debtor loses the protection of the NCA...