The National Credit Regulator (NCR) recently published their annual report which highlighted several key developments during the 2021/22 period. With its latest annual report, the NCR chose to remind the public of its commitment in complying with all applicable laws and regulations along with taking reasonable measures to ensure compliance.
Credit Provider Compliance
The NCR Credit Provider Compliance Department is responsible for monitoring the consumer credit industry to ensure that prohibited conduct is prevented or detected, and appropriate enforcement action taken. During 2021/22, the department approached compliance monitoring both pro-actively and re-actively through desktop monitoring, analysis of statutory reports, monitoring of conditions of registration and market conduct studies.
The department conducted compliance monitoring of 328 credit providers in respect of total cost of credit, reckless lending and/or collection of prescribed debt. The most common contraventions related to overcharging of interest, non-disclosure of total cost of credit, overcharging of initiation fees and failure to conduct affordability assessments.
Enforcement action was taken against non-compliant credit providers. In total, over R14 million in fines and penalties were imposed on entities that were found to be contravening the Act. Twenty-one (21) judgments were obtained from the National Consumer Tribunal where administrative fines were imposed.
Registrations
The NCR Registrations Department registers credit providers, credit bureaus, debt counsellors, alternative dispute resolution agents and payment distribution agents. It is also responsible for the lapsing of registrations, maintaining the register of registrants and managing the payment of annual registration renewal fees by the registrants. Furthermore, the department is responsible for renewing registrations.
In terms of new registrations, the department registered 1 350 credit providers during 2021/22 which is a 25.46% increase compared to 1 076 the previous year. The increase can be attributed to improvements in the processing of applications’ turnaround times as the department enhanced certain efficiencies. The increase in the number of credit providers registered may ultimately lead to job creation and economic growth.
Risk Management
The annual report also highlighted a Risk Management Policy and Strategy that was initiated to identify new and emerging risks within the credit sector. The NCR Audit and Risk Management Committee advised management on the overall system of risk management, especially the mitigation of unacceptable levels of risk. This committee provides oversight with regard to financial management, internal controls, risk management and the accuracy of financial reporting.
Fraud Prevention
The Fraud Prevention Plan was developed by the NCR within the context of the Risk Management Framework with the aim to reduce fraud to an absolute minimum and effect policies and procedure to maintain the risk of fraud within tolerable levels, and preferably zero, at all times.
Measures implemented to prevent fraud include authorisation, custody of assets, detection controls, physical supervision, management information, and segregation of duties, physical security and information security.
The Fraud Prevention Policy includes response mechanisms to report, investigate and resolve incidents of fraud impacting the NCR. Employees could report incidents of corruption, fraud and unethical practices within the workplace with independent investigations proceeding thereafter. Monthly reports from the hotline service provider are dealt with confidentially in line with the approved internal policy for handling fraud allegations.
During the reporting period the NCR received one report of alleged internal corruption.. An investigation was instituted, and the outcome revealed the allegation to be unfounded.
What to expect for the year ahead?
Monitoring of compliance with the total cost of credit and affordability assessments will remain the main total focus areas of the Credit Provider Compliance Department of the NCR for the year ahead. The department is also expected to conduct more on-site compliance monitoring visits seeing that COVID-19 restrictions have been lifted.
How Masthead can assist Credit Providers
Masthead can assist you with your Credit Provider registration process and also assist with ongoing monitoring and reporting on regulatory requirements. The level of assistance provided to Credit Providers can be customised according to the specific needs of the Credit Provider.
Find out how we can assist Credit Providers with registration and compliance monitoring.