Finance houses, mortgage providers, in fact all companies and individuals who extend credit, are potentially facing an information overload due to significant changes to the regulatory and administrative frameworks within which they operate as a result of the soon-to-be promulgated National Credit Act.
The regulations are presently in the form of the National Credit Bill, which can be viewed on the Web site of the Department of Trade and Industry.
It is government`s intention to promulgate the Act within the next six months.
“This legislation will have a major impact on all businesses granting credit and will specifically affect their business and accounting software systems,” says Errol Wills, managing director of business and accounting software reseller and solutions provider Lorge.
“The Act focuses on the affordability of all credit granted by enterprises, be it to other businesses or individuals, and on the gathering and centralisation of all data relating to such credit transactions. This will make huge demands on administration and record-keeping that will need to be dealt with by financial software.”
Wills adds that the Bill provides for all companies and individuals who extend credit as a normal integral part of their business operations, to be registered with a new consumer credit statutory body. To be known as the National Credit Regulator (NCR), it will be tasked with establishing a central database on which all users of credit and the details of their credit transactions will be recorded by credit providers.
“In terms of the final draft of the Bill, any provider of credit must report a host of very specific information about the transaction to the NCR in a `prescribed manner and form`. Failure to do so would presumably lead to prosecution via the courts, stiff fines and even jail terms. No details are as yet available but it can be assumed that the NCR will enjoy extensive powers of prosecution.”
Originally gazetted as the Consumer Credit Bill in August last year, the National Credit Act will replace the Usury Act (1968) and the Exemption Notices and Credit Agreements Act (1980).
The views of Wills are supported by Ben Pieters, managing director of local business software development house Graytech, a Rosebank-based company that specialises in consumer/enterprise finance solutions that integrate with major international accounting software package, ACCPAC.
Pieters says Graytech`s software already complies with the anticipated regulatory and other requirements that the NCR is likely to issue in the form of regulations to the Act.
“There is no doubt that the implementation of the National Credit Act will have a profound effect on the manner in which credit is extended, administered, reported on and controlled in SA,” says Pieters.
“The legislation will create a new regulatory environment in which all credit providers, no matter how large or small, will have to face up to far-reaching changes in the way they do business. Their consumer finance administration systems will certainly require modification and the only efficient way of doing so is with software that will extract the specific information required by the NCR and present it quickly and accurately in the appropriate format.”
Pieters anticipates that the additional information to be provided or recorded will be quite onerous. “It is likely that each business will have to first register as a credit provider, as well as file a copy of its credit policies. Thereafter business may not be conducted outside of this framework.
“Secondly, each potential client may first have to be registered on the central database and a reference number recorded in the enterprise`s records. Thirdly, the credit-worthiness of each client will have to be checked and the details of the planned credit transaction recorded on the central database. Thereafter the enterprise might be required to electronically upload its entire portfolio of credit accounts to the central database on a monthly basis.”
Issued by: Copywise
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