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The Final Credit Life Insurance Regulations
The Industry has until August 2017 to align with the final Credit Life Insurance Regulations that the Minister of Trade and Industry, Dr Rob Davies published last month in consultation with the Minister of Finance. The regulations will come into effect on the 10th August 2017 and will only affect credit agreements concluded on or after the date of implementation.
Issuance of the Regulations is a sequel of Parliament’s and Cabinet’s decision that over-indebtedness should be curbed. Minister Davies says the Regulations are one of the many that are already issued to deal with household over-indebtedness. Such regulations include:
The Affordability Assessment Regulations, setting out the criteria for assessing a consumer’s means to qualify for credit, implemented on the 14 September 2015;
The Review of Limitations on Fees and Interest Rates Regulations, providing for the capping of fees and interest rates charged as cost of credit, implemented on the 6 May 2016; and
The Determination of a threshold required for credit provider registration, providing for a “nil” (R 0.00) threshold in order to compel anyone involved in the business of extending credit to register with the National Credit Regulator (NCR). The threshold was implemented on the 11 May 2016.
The Minister of Finance has to concur with the Minister before the issuance of the Regulations. Officials of the Department of Trade and Industry (
), National Treasury, Financial Services Board (FSB) and National Credit Regulator worked tirelessly on the Regulations until the Ministers’ concurrence and issuance.
The Regulations make provision for the following:
Applicability to credit providers;
Maximum prescribed cost per month, that a credit provider may charge a consumer;
Two options for the calculation of the cost, (either on the deferred amount at the inception of the credit agreement or on the deferred amount from time to time under the credit agreement);
The settlement of the outstanding balance of the consumer’s total obligations under the credit agreement, in the event of the consumer’s death or permanent disability;
The settlement of all the consumer’s obligations under a credit agreement that become due and payable for specific periods in the event of the consumer’s temporary disability and in the event of the consumer becoming unemployed or unable to earn an income;
That no cost relating to occupational disability may be included in the cost of the insurance, where a consumer is a pensioner on the date that the credit life insurance policy is entered into.
That no cost relating to the risk of becoming unemployed or being unable to earn an income may be included in the cost of the credit life insurance, where a consumer is not employed on the date that the credit life insurance policy is entered into;
That the insurance policy may include the cost relating to the risk of the consumer being unable to earn an income other than as a result of retrenchment or occupational disability, where a consumer is self-employed in the formal or informal sector, or employed in the informal sector on the date the credit life insurance policy is entered into;
That the cost must be determined having regard to the actual risk and liabilities associated with the credit agreement, whether such risk is determined with reference to the life insured’s individual risk profile or underwritten on a group basis;
Insurance industry specific exclusions and limitations, waiting periods and benefits in addition to minimum benefits to be included in the insurance policy; and
Annual charging of the cost and substitution of one insurance policy with another.
Minister Davies says the Regulations, read together with the aforementioned implemented regulations, court judgments on garnishee orders and illegal deductions on social grants, will make a sizeable dent in the reduction of household over-indebtedness.
also appreciates the recent judgment of the National Consumer Tribunal (NCT), relating to the deregistration and stoppage of retention of debit cards, credit cards and identity documents of borrowers by micro-lenders.
and the NCR will be embarking on aggressive education and awareness on the Regulations and other credit matters.
Sidwell Medupe-Departmental Spokesperson
Tel: (012) 394 1650
Mobile: 079 492 1774
Issued by: The Department of Trade and Industry
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