Measures to protect and assist low-income consumers against reckless lending and over-indebtedness

Abstract

This thesis critically examines the effectiveness of the reckless lending provisions contained in the National Credit Act 34 of 2005 (NCA), with particular emphasis on the consumer affordability assessment obligations imposed on credit providers. The central question addressed is whether these provisions, especially those introduced through Regulation 23A in the 2014 amendments, have succeeded in improving the position of South Africa’s low-income consumers or whether they have inadvertently created new barriers to credit access and financial relief. The research traces the evolution of the pre-agreement affordability assessment framework, analysing its doctrinal development and practical application, and interrogates whether the regulatory intent of safeguarding vulnerable consumers has been realised in practice. Beyond preventative measures, the study investigates the remedial mechanisms available to low-income consumers who nonetheless fall victim to reckless lending. The debt review process under section 86 of the NCA is subjected to detailed scrutiny, with particular attention to its accessibility, affordability, and procedural effectiveness. Complementary avenues of redress—including alternative dispute resolution mechanisms, the National Credit Regulator, the National Consumer Tribunal, Consumer Courts, and relevant ombuds—are evaluated to determine whether these institutions provide meaningful and equitable relief to over-indebted low-income consumers. For the purposes of this research, ‘low-income consumer’ refers not to the poor or unemployed, but to individuals within the Living Standards Measure (LSM) 5–7 categories, earning between R4 465 and R11 263 per month, who are theoretically capable of repaying credit but remain vulnerable to over-indebtedness. The thesis adopts a doctrinal methodology, drawing on statutory provisions, case law, regulatory instruments, and academic commentary, while situating the South African framework within a comparative and international context. The study benchmarks South Africa’s affordability assessment regime and debt relief mechanisms against international principles and guidelines issued by bodies such as the World Bank, the Organisation for Economic Co-operation and Development, the Group of Twenty, and the International Federation of Insolvency Professionals’ International Consumer Debt Report, as well as against the consumer credit regimes of the United Kingdom and Australia. These jurisdictions, with their well-developed responsible lending frameworks, provide valuable comparative insights into balancing consumer protection with financial inclusion. Findings reveal that while Regulation 23A and the broader NCA framework represent important steps towards responsible lending, their implementation has fallen short in addressing the lived realities of low-income consumers. The affordability assessment provisions, though designed to prevent reckless credit, have in practice restricted access to credit for many low-income households, thereby undermining financial inclusion. At the same time, the debt review process and related dispute resolution mechanisms remain prohibitively costly, procedurally complex, and inaccessible to those most in need of relief. As a result, low-income consumers continue to face significant obstacles both in avoiding reckless lending and in obtaining redress once over-indebtedness occurs. The persistence of high levels of indebtedness in South Africa, compounded by structural socio-economic challenges such as unemployment, poverty, and inequality, underscores the urgent need for regulatory reform. The findings clearly indicate that the current framework does not adequately protect low-income consumers and requires reorientation. With reference to international principles and guidelines, the thesis concludes with concrete suggestions for reform, aimed at strengthening consumer protection, enhancing the accessibility of relief mechanisms, and promoting a fairer, more inclusive credit system. In doing so, it contributes to the broader discourse on responsible lending and consumer protection in emerging markets and highlights the imperative of aligning regulatory design with the realities of vulnerable consumers. .