The Impact of Regulatory Framework on the Conduct of Credit Providers in the Consumer Credit Market in South Africa

Abstract

The size of the consumer credit market has grown at a faster rate catalysing the development of the South African economy. Robust economic regulation is viewed as a necessary intervention that fosters a developing credit market environment. The dynamic nature of the consumer credit market requires a regulatory architecture that is flexible enough to adapt and respond to institutional and market circumstances. The reason for promulgating the National Credit Act, 34 of 2005 in South Africa was fivefold: to promote equity, to regulate the consumer credit in such a manner that it promotes economic development, to remedy regulatory deficiencies caused by an inadequate regulatory regime, to curb abusive practices, and provide remedies for those prejudiced. The research design involves an empirical study presented in an exploratory and descriptive fashion using a qualitative research approach. The investigation also utilises modern methodologies like the Regulatory Impact Analysis and Cost Benefit Analysis and Content analysis tailored for evaluating regulatory frameworks across jurisdictions. The National Credit Act, 34 of 2005 regulatory architecture has played a salient role in pioneering a new culture and enhancing the development of the credit market. However, there are challenges around the implementation thereof by credit providers especially when considering aspects of volatility, interconnectedness of the global financial markets and dynamic nature of the market spurned by technological changes. The current architecture of the National Credit Act is not adequate to effectively impact the conduct of credit providers in South Africa.