This resulted in credit in excess of billions being granted to consumers, increasing the level of household indebtedness. "The introduction of the affordability assessment regulations is necessary and urgent to address the prevalence of reckless lending in
Credit providers are required, prior to issuing credit, to determine the financial means and prospects of a consumer, the consumer's existing financial obligations and their debt repayment history.
Ntuli said the regulations set out the criteria for conducting affordability assessments. This includes calculating the consumer's allocable and discretionary income and taking into account all debts, including monthly debt repayment obligations, as reflected on the consumer's credit profile held by a registered credit bureau. This also takes into account maintenance obligations arising from statutory deductions or necessary expenses.
"Furthermore, the regulations create a 'buffer', which will ensure that households remain with money to put essentials on the table on a month to month basis after repaying their debts.
"The 'buffer' means that no credit should be extended if repayment of such credit will be from the income in the buffer. The responsibility on the consumer to disclose fully their financial obligations to the credit provider is very important to affordability assessments," said Ntuli.
Ntuli said the success of the affordability assessment hinges on both consumers and the credit providers to be honest and responsible.
The department will hold meetings with relevant stakeholders in the credit industry to discuss the draft regulations as part of the consultative process.
Stakeholders and members of the public have until
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