The South African lawmakers are pushing for the National Credit Amendment (NCA) Act, which seeks to assist thousands of residents with debts to relieve their financial situation, BusinessTech said. However, ENews Channel Africa (eNCA) noted that the so-called debt relief bill is seen as a “double-edged sword” for South Africans.

In achieving its goal to relieve citizens living with debt, the NCA offers the chance to “have their debt suspended in part of in full for up to 24 months.” To avail of this, citizens need to send in their applications. For successful applicants, the bill opens the possibility of the debt being “extinguished” if the financial situation of the individual does not improve.

Qualified individuals include those who have unsecured loans of R50,000 and under. The debt must also be acquired through “unsecured credit agreements, unsecured short term credit transactions or unsecured credit facilities only.” Moreover, the individual must have an income of R7,500 per month over the past six months.

South Africa’s Debt Relief

While this may be a good thing for indebted South Africans, the implementation of the NCA can work to their disadvantage. To put it into perspective, eNCA cited FinMark Trust report which revealed that “around a third of the population rely on loans for necessities like food.”

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With the implementation of NCA, SA’s major banks face   They emphasized that “they had or would cut back on lending to those low-income customers who might qualify for relief in the future.”

Some of the banks that had or would reduce its lending to qualified by low-incomes borrowers include African Bank, Absa, FirstRand and Capitec.

Aside from the decreased lending activity toward the group, experts said that they may be consequences when applying for the write-off. Wayne McCurrie from FNB Wealth warned that applicants risk the possibility of not getting credit from the formal sector again.

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