Debt relief Bill could see R20bn written off
The Treasury estimates the total debt that could fall under debt extinguishing provisions of the National Credit Amendment Bill proposed by Parliament’s Trade and Industry Committee could range from R13.2bn to R20.7bn, notes a Business Day report.
The Treasury said that banks and retailers would be the most heavily affected by the proposed extinguishing of debt, and is seeking senior counsel opinion on whether the extinguishing of debt would infringe on the property rights of creditors.
The banks are opposed to the proposals, which they say will raise the cost of credit and reduce credit extension to low-income groups. According to research by consultancy Eighty20, about 56% of the credit-active market of about 18.4m individuals will become eligible. ‘Based on the income estimates, approximately 9m borrowers could potentially meet the eligibility criteria for debt intervention as per the draft Bill,’ Eighty20 said in a presentation to the committee.
‘In total, borrowers that could qualify for debt review hold over 16m loans. And 29% of these loans (4.7m) are three months or more in arrears belonging to borrowers who could qualify for debt intervention. The outstanding balance on these loans is around R20.7bn.’
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