NATIONAL CREDIT REGULATOR Briefing by National Credit Regulator

NATIONAL CREDIT REGULATOR Briefing by National Credit Regulator on its Annual Report 2016/17 Presentation to Portfolio Committee on Trade and Industry Presented by: Ms Nomsa Motshegare, NCR CEO Date: 3 October 2017

OVERVIEW OF PRESENTATION 1. NCR Strategic Objectives 2016/17 2. New Regulations 3. Regular Engagements with Key Stakeholders 4. Key Highlights – 2016/17 5. Performance Information Tables 6. Financial Information – Annual Report 2016/17 7. Audit Outcomes 2016 -2017 8. First quarter performance Report 2017/18 9. Financial Performance- Q 1 - 2017/18 2

THE NCR STRATEGIC OBJECTIVES FOR 2016/17 To promote responsible credit granting: Ø Improve compliance with affordability assessment regulations. Ø Increase compliance with regulations pertaining to total cost of credit. To protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness: Ø Conduct reckless lending investigations & take enforcement action where necessary. Ø Improve awareness on deceptive and unfair credit practices. To enhance the quality and accuracy of credit bureau information: Ø Increase compliance by credit bureaus in respect of consumer credit information. To improve NCR’s operational effectiveness: Ø Improve operational efficiency through automated processes. Ø Service delivery improvement plan. To ensure effective implementation of the National Credit Amendment Act (NCAA): Ø Improve awareness and compliance. Ø Conduct special investigations & take enforcement action taken where necessary 3

NEW REGULATIONS Ø Limitations on fees and interest rate; Ø Determination of thresholds for credit provider registration; Ø Determination of application, registration and renewal fees; 4

REGULAR ENGAGEMENTS WITH KEY STAKEHOLDERS Ø Community Outreach Programmes (Imbizos) with Traditional Authorities: Ga-dikgale (Limpopo), Duncan Village (E/Cape), Gopane and Mabiskraal (N/West), Matsulu and Lillydale (Mpumalanga). Ø “Know your credit status” consumer awareness campaigns: NCR partnered with Credit Bureau Association & Credit Bureaus. Ø The Credit Industry Forum (CIF) met on a quarterly basis. Ø The NCR held regular meetings: industry associations, registrants, magistrates, local regulators, local and foreign investors. Ø NCR participated in the joint African Dialogue conference together with NCT, NCC, CIPC and NRCS: Collaboration on consumer protection issues & information sharing. 5

KEY HIGHLIGHTS - 2016/17 Enforcement: Ø Referred 39 matters to the NCT: Banks, Retailers, small credit providers & debt counselors; v Referrals to the NCT e. g. Lewis Stores, Allied Capital and Wesbank v Main alleged contraventions: Unlawful extended warranties and club fees; the socalled “Pawn your car and still drive it” scheme; and unlawful debt enforcement. Raids: Ø Numerous raids were conducted on microlenders who retain consumers’ bank cards and identity documents in Gauteng (Hammanskraal, Vanderbjlpark, Vereeniging & Soweto); Free State (Theunissen); Northern Cape (Kimberly, Barkley West and surrounding areas) and Limpopo (Makhado) provinces. 6

KEY HIGHLIGHTS 2016/17 - cont. Judgement handed down against Lewis Stores Ø The NCR, referred Lewis Stores Ltd (Lewis Stores) and Monarch Insurance Company Ltd (Monarch) to the NCT. Issues uncovered related to the: v sale of loss of employment insurance as part of credit insurance to pensioners and self-employed consumers; R 67 m refunds to consumers; and v sale of occupational disability insurance to pensioners and people with disabilities. Lewis is challenging this on a technical point. Ø The NCT judgement, agreed with the NCR’s submissions and has: interdicted Lewis Stores from engaging in this conduct in future; v Ordered that an independent audit be conducted on all credit agreements entered into by Lewis Stores since 2007; and v That all affected consumers, identified in the audit, be reimbursed the premiums paid for this insurance. Lewis Stores has since appealed the judgement of the NCT to the High Court. 7

KEY HIGHLIGHTS 2016/17 - cont. PDA distribution & Refunds to consumers: Ø Payment Distribution Agents distributed a total of R 8. 5 billion to credit providers; Ø Refunds to consumers as a result of successful enforcement, complaints resolution and compliance monitoring are >R 101 million Education and Communication: Ø More than 490 workshops, exhibitions, activations and roadshows. Ø Community outreach programmes in rural areas (imbizos). Ø ‘’Know your credit status’’ campaigns. Ø NCR obtained an equivalent of R 254 million in media coverage; Ø The NCR was featured in 456 radio/TV interviews and newsprint. Ø Free weekly slots on community radio stations: Sefako Makgatho, University FM, Energy FM, Mogale FM, Qwaqwa FM, Radio Zeerust, Lekoa Community Radio, Hlanganani FM, Greater Tzaneen FM, Unisa FM and Naledi Community Radio. 8

ANNUAL 2016/17 Annual. REPORT Report 2016/17 Performance Tables 9

SO 1: to promote responsible credit granting Output Performance measure or indicator Improve compliance Number of provinces with affordability in which credit assessment regulations. providers’ compliance was monitored in respect of affordability assessment regulations and enforcement action taken where necessary. 10 Actual achievement Planned target Actual achievement 2015/2016/2017 9 provinces visited to monitor credit provider compliance. Sixty-nine (69) credit providers were referred for investigation. Credit provider compliance monitored in 9 provinces. Enforcement action taken on non- compliant credit providers where necessary. Compliance: Achieved Monitoring conducted in 9 provinces. GP, N/W and E/C provinces were monitored more than once. Enforcement: Achieved Letters of instructions were sent to various credit providers covering the 9 provinces.

SO 1: to promote responsible credit granting cont. Output Performance Actual measure or achievement indicator 2015/2016 Planned target Actual achievement 2016/2017 Increase compliance with provisions pertaining to the total cost of credit. Number of investigations conducted to enforce regulations and enforcement action taken where necessary. 40 investigations Investigations: Exceeded conducted and 52 investigations concluded. enforcement action taken Enforcement: Not achieved where necessary. 6 matters referred to the NCT and courts, 1 matter was closed as no contraventions were found. The rest of the matters are WIP and will be dealt with in the next financial year. 11 32 investigations concluded. 15 matters referred to the NCT, 1 compliance notice issued and 4 matters were closed as no contraventions found. The rest of the matters are WIP and will be dealt with in the next financial year. Reason for Variance: Focus was given on finalizing matters from the previous financial year Corrective Action A new enforcement approach to fast track enforcement action has been adopted.

SO 2: to protect consumers from abuse and unfair practices in the consumer credit market and address overindebtedness Output Performance measure or indicator Actual achievement 2015/2016 Conduct reckless Number of credit 56 Investigations lending providers on Reckless investigations and investigated and lending enforcement appropriate completed. action taken enforcement 8 matters were where necessary. action taken referred to the where necessary. NCT, 4 matters were closed as no contraventions were found. The rest of the matters are still WIP and will be dealt with in the next financial year. 12 Planned target Actual achievement 2016/2017 60 investigations Investigations: Exceeded conducted and 61 Investigations on Reckless lending completed. enforcement Enforcement: Not achieved action taken where necessary. 10 matters were referred to the NCT, 4 matters were closed as no contraventions were found. The rest of the matters are still WIP and will be dealt with in the next financial year. Reason for Variance: Focus was given on finalizing matters from the previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted.

SO 2: to protect consumers from abuse and unfair practices in the consumer credit market and address overindebtedness -cont. Performance Output measure or indicator Actual Planned target achievement 2016/2017 2015/2016 Improve awareness on Number of None (new deceptive and unfair multimedia target for credit practices. awareness 2016/2017). campaigns (radio/TV interviews/news print) conducted on deceptive and unfair credit practices. 13 30 of any of the following: -Radio -TV interviews -News print on deceptive and unfair credit practices. Actual achievement Exceeded 42 multimedia campaigns conducted Reason for Variance: Weekly interviews were offered by different radio stations.

SO 3 : to enhance the quality and accuracy of credit bureau information. Output Performance measure or indicator Actual achievement Planned 2015/2016 target 2016/2017 Increase compliance by credit bureaus in respect of consumer credit information. . Number of credit Investigations into two 6 credit bureaus monitored and completed. monitored and enforcement (Compuscan and enforcement action taken Robertson). action taken where necessary. Enforcement action by where way of instructional necessary. letters was sent to both entities. Actual achievement Monitoring: Exceeded 15 credit bureaus monitored and or investigated. Reason for Variance: Due to policy change from on-site visits to desk top monitoring. The department managed to monitor more credit bureaus. Enforcement: Achieved Out of 15 credit bureaus monitored/ investigated, 4 were operating as unregistered entities and subsequently registered. 11 credit bureaus were found to be compliant. 14

SO 3 : to enhance the quality and accuracy of credit bureau information – cont. Output Performance measure or indicator Actual achievement 2015/2016 Planned target 2016/2017 Actual achievement Increase compliance by credit bureaus in respect of consumer credit information. Number of credit bureau audited reports reviewed and enforcement action taken where necessary. 14 credit bureau audited reports reviewed. 6 entities were referred for investigation in the 1 st quarter. All registered credit Achieved bureaus audited Auditor’s reports from credit bureaus reports reviewed were reviewed. and enforcement action taken where necessary. Enforcement/ Corrective: Achieved Letters on instruction were issued to all credit bureaus for risk mitigation plans to be put in place and bureaus complied. There was no need for enforcement action to be taken. 15

SO 4 : to improve NCR’s operational effectiveness. Output Performance measure or indicator Actual achievement Planned target Actual achievement 2015/2016/2017 Improve % of uptime operational availability of the efficiency through ICT (Registrations automated and Complaints) processes systems. On average - 99. 5 % of uptime availability of the ICT system. Service delivery SDIP approved. improvement plan (SDIP). None (new target for 2016/2017). 16 96% uptime of Exceeded. the ICT system. 100 % of uptime availability of the ICT system. Reason for Variance: The target was exceeded because of the network monitoring tool that enables ICT department to predict network failures in order to avoid downtime. SDIP 2016 -2019 Achieved approved. SDIP approved by the Accounting Authority.

SO 5 : to ensure effective implementation of the National Credit Act as amended (NCA). Output Improve awareness and compliance. Performance Actual measure or indicator achievement 2015/2016 Number of workshops 43 workshops conducted with relevant stakeholders on NCA. Number of multimedia 58 multimedia awareness campaigns awareness (radio/TV campaigns. interviews/news print) conducted on NCA. Number of outreach programmes and exhibitions (mall activations/ Outside Broadcast (OB)/ Road shows/ Imbizos) conducted on NCA. 17 12 exhibitions conducted in periurban and rural areas. Planned target 2016/2017 Actual achievement 45 workshops with Exceeded. relevant 46 workshops were conducted with stakeholders relevant stakeholders 50 of any of the following: Radio TV interviews News print 11 of any of the following: Mall activations/ exhibitions/ OB/ Road shows/ Imbizos in peri urban and rural areas. Reason for Variance: Received more invites & initiated more w/shops. Exceeded 58 multimedia awareness campaigns conducted. Reason for Variance: Weekly interviews were offered by different radio stations. Exceeded 15 outreach programmes were conducted. Reason for Variance: Received more invites & initiated more programmes.

SO 5 : to ensure effective implementation of the National Credit Act as amended (NCA). Performance Actual Planned target Actual achievement measure or achievement 2016/2017 indicator 2015/2016 Conduct Number of Three (3) raids The following Achieved special were conducted special Raids were conducted in 4 provinces (N/C, GP, Limpopo & F/S). investigations in the W/C & investigations s and conducted Limpopo conducted: Enforcement: Raids enforcement and provinces. Achieved action taken enforcement Enforcement Raids in four (4) Criminal cases opened with police in all 4 provinces. 8 compliance where action taken action was provinces; notices issued to unregistered new entrants & 16 matters closed as no necessary. where taken on 2 contraventions found. necessary. raids in which criminal cases were opened with the police. 4 prescribed Achieved debt 4 investigations conducted investigations; Enforcement: prescribed debt: Partially achieved 2 matters closed as no contraventions found. The other 2 still WIP and will be dealt with in the next financial year. Output Reason for Variance: Focus given on finalizing matters from previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted. 18

SO 5 : to ensure effective implementation of the National Credit Act as amended (NCA) – cont. Output Performance Actual measure or achievement indicator 2015/2016 Planned target Actual achievement 2016/2017 Conduct special investigations and enforcement action taken where necessary. Number of Three (3) raids Four (4) Exceeded special were conducted Garnishee order 11 investigations conducted. investigations in the W/C & investigations conducted and Limpopo Reason for variance: enforcement provinces. More referrals were received from the Complaints. action taken Enforcement In addition, more desktop compliance monitoring where action was done. necessary. taken on 2 raids Enforcement: Garnishee: Partially achieved in which 2 matters were referred to the NCT. The rest of criminal cases the matters are still WIP and will be dealt with the were opened next financial year. with the police. Reason for Variance: Focus was given on finalizing matters from the previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted. 19

SO 5 : to ensure effective implementation of the National Credit Act as amended (NCA) – cont. Output Performance measure or indicator Actual achievement 2015/2016 Conduct special investigations and enforcement action taken where necessary. Number of special Three (3) raids were investigations conducted in the conducted and W/C & Limpopo enforcement action provinces. taken where Enforcement action necessary. was taken on 2 raids in which criminal cases were opened with the police. Planned target Actual achievement 2016/2017 Unregistered new entrants (credit providers ADRs and PDAs) in 4 provinces and take enforcement action where necessary. Achieved *Investigations conducted in 2 cities/towns in the first half of the financial year. The balance conducted in the 2 nd half of the financial year, in KZN and GP provinces. * Target changed during mid-year review from cities/ towns to provinces. Enforcement: Unregistered: Partially achieved 8 compliance notices issued to unregistered new entrants in KZN, GP & N/C provinces. 1 matter relating to GP province was closed as no contraventions found. Reason for Variance: Focus was given on finalizing matters from the previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted. 20

ANNUAL REPORT 2016/17 - FINANCIAL INFORMATION 2016/17 (Budget) R Total Income Expenditure 127 183 606 2016/17 (Actual) R 107 398 274 103 298 980 (120 833 723) (118 898 987) (114 196 671)(121 739 257) 6 349 883 1 507 082 Capital Expenditure 6 349 883 6 328 596 21 2014/15 (Actual) R 120 406 069 Surplus/(Deficit) for the year incl non-cash items Total Assets Total liabilities Net asset value 2015/16 (Actual) R - 80 635 055 (75 377 650) 5 257 405 (6 798 397) (14 122 499) 2 815 338 4 317 778 66 053 390 58 994 538 (62 303 067) (48 445 818) 3 750 323 10 548 720

AUDIT OUTCOMES 2016 -2017 • Summary of previous audit outcomes • Unqualified audit opinion with findings • Cause: Technical - material adjustment on the PDA Interest Utilisation - Accounting treatment: GRAP 1 vs GRAP 23 22

AUDIT OUTCOMES 2016 -2017 Ø 2016 -2017 Audit Findings: Plan of Action 23

FIRST QUARTER PERFORMANCE REPORT QUARTER (1) REPORT 2017/18 24

QUARTER (1) REPORT 2017/18 Output 2017/18 1 st Quarter milestones Annual Target SO 1: To promote responsible credit granting Improve compliance with Credit provider (CP) compliance 1 province. affordability assessment monitored in 9 provinces. regulations Enforcement action taken on non -compliant credit providers where necessary. Increase compliance with provisions pertaining to total cost of credit. 50 investigations conducted and enforcement action taken where necessary. 10 investigations. Actual Achievement Exceeded: CPs monitored in GP, KZN & W/C provinces. Letters of instructions sent to 96% CPs Reason for variance: Due to policy change from on-site visits to desktop monitoring. The department managed to monitor more CPs. Exceeded: 14 investigations Reason for variance: Additional desktop compliance monitoring informed the necessary investigations to be conducted. 25

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1 st Quarter milestones Actual Achievement SO 2: To protect consumers from abuse and unfair practice in the consumer credit market and address overindebtedness. Conduct reckless lending investigations and enforcement action taken where necessary. 70 credit provider investigations conducted and enforcement action taken where necessary. 15 investigations. Achieved: 15 investigations conducted. Improve awareness on deceptive and unfair credit practices. 35 of any of the following: Radio/TV interviews & news print on deceptive and unfair credit practices. 7 of any of the following: Radio/ TV interviews & news print. Exceeded: 8 radio interviews conducted. 26 Reason for variance: Negotiated with community radio stations to cover deceptive & unfair credit practices. There was more interest on the topic than anticipated.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 1 st Quarter Annual Target milestones SO 3: To enhance the quality and accuracy of credit bureau information. Increase compliance 8 credit bureaus (CBs) Monitor 2 credit by credit bureaus in respect monitored. bureaus. of quality and accuracy of consumer credit information. Enforcement action taken where necessary. Review 100% of audited reports from credit bureaus and enforcement action taken where necessary. 27 Review 100% of audited reports from credit bureaus and enforcement action taken where necessary. Actual Achievement Exceeded: 5 CBs monitored. All bureaus were found to be compliant. Reason for variance: Due to policy change from on-site visits to desktop monitoring. The department managed to monitor more CBs. Achieved: 100% audited reports from CBs reviewed. An instructional letter was sent to one CB.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target SO 4: To improve NCR’s operational effectiveness. Improve operational 97% uptime of the ICT efficiency through system. automated processes. Improve service delivery regarding written enquiries. 28 1 st Quarter milestones Actual Achievement 97% uptime of the ICT system. Exceeded: 99. 99% of uptime availability of the IT system. Reason for variance: The target was exceeded because of the network monitoring tool that enables ICT to predict network failures in order to avoid downtime. All written enquires All written Achieved: received and processed enquiries All written enquiries received and within average of 10 received and processed within an average of 11 business days by 31 March processed within business days. 2018. an average of 11 business days.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1 st Quarter milestones Actual Achievement SO 5: To ensure effective implementation of the National Credit Amendment Act. Improve awareness and compliance. 29 50 workshops with relevant 12 workshops. stakeholders. Achieved: 12 workshops conducted. 55 of any of the following: Radio/TV interviews/News print. 13 Radio /TV interviews/ News print. Achieved: 13 radio interviews conducted. 15 of any of the following: mall activations/exhibitions/ OB/ Road shows/Imbizos on peri urban and rural areas. 4 of any of the ff. : mall activations/ exhibitions/OB/ Road shows/ Imbizos on peri urban and rural areas. Exceeded: 5 exhibitions were conducted. Reason for variance: Received more invites from stakeholders.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1 st Quarter Actual Achievement milestones SO 5: To ensure effective implementation of the National Credit Amendment Act. Improve compliance by conducting special investigations/audits and taking enforcement action where necessary. 30 Conduct special investigations/ 1 province audits in four (4) provinces in any of the following: Prescribed debt/ Garnishee orders/ Unregistered new entrants (credit providers, Alternative Dispute Resolution Agents (ADRAs) and PDAs) and enforcement action where necessary. Exceeded: Investigations into unregistered (ADRAs) were conducted in 3 provinces. (GP, WC, & NW provinces). Reason for variance: Increase in consumer awareness resulted in increase of consumer complaints against unregistered ADRAs.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1 st Quarter milestones Actual Achievement SO 6: To facilitate efficient registration of persons and entities. Improve efficiency in 85 % of applications the registration process registered within 10 of persons and entities. business days of receipt of signed proposed conditions and payment of registration fees. 31 85 % of applications registered within 10 business days of receipt of signed proposed conditions and payment of registration fees. Exceeded: (CPs): 99% CPs registered. 96% DCs registered. Reason for variance: Improved turnaround times as a result of building efficiencies in processing applications.

1 ST QUARTER - 2017/18 FINANCIAL PERFORMANCE ACTUAL BUDGET Q 1 (Apr - Jun 2017) R R R % R Fees from registrants 2 296 340 4 139 178 (1 842 838) -44. 5% 55 051 554 DTI Transfers 43 834 000 0% 0% 65 727 000 Other Income 1 059 857 1 574 600 (514 743) -32. 6% 3 000 TOTAL INCOME 47 190 197 49 547 778 (2 357 581) -4. 8% 130 717 713 Personnel costs 18 509 562 19 406 362 896 800 4. 6% 83 247 690 Programme costs 2 822 643 4 566 544 1 743 901 38. 2% 18 783 096 Administrative costs 5 738 420 5 518 617 (219 803) -3. 9% 21 914 248 OPERATING EXPENDITURE incl non-cash 27 070 625 29 491 523 2 420 898 8. 2% 123 945 034 NET SURPLUS/(DEFICIT) 20 119 572 20 056 255 (63 317) -0. 3% CAPITAL EXPENDITURE 1 242 912 6 772 679 5 529 767 81. 6% 32 VARIANCE Q 1 (Apr - Jun 2017) ANNUAL BUDGET 2017 - 2018 6 772 679

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