The Banking Association of South Africa (BASA) has warned that the proposed National Credit Amendment Bill will lead to excessive government intervention in banks.
The bill will compel credit providers to comply with a prescribed code of conduct, including an affordability clause yet to be decided by the minister of trade and industry in consultation with the National Credit Regulator.
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It has been proposed in an effort to exert more control over reckless lending by credit providers but banks are not warming to a code of conduct enshrined in statute, arguing that they already have stringent internal regulations.
Cas Coovadia, MD of BASA, appearing at the public hearings in Parliament, said that banks were concerned that a prescribed code would create opportunities for inclusion in such code of issues that should be addressed through amendments to the act.
"We are particularly concerned that a prescribed code and amendments to such code by the minister bypasses the parliamentary process," he said, adding that this could have detrimental effect on all involved in the credit industry.
He insisted that a code of conduct should only be regulated by the National Credit Regulator and should not be the prerogative of a minister, calling for a limitation of ministerial powers should the bill go through.
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By GlobalDataAn industry code of conduct, Coovadia said, encouraged banks to be active partners in the development of the industry "without government intervention".
Other objections expressed were against the affordability clause and the automatic removal of consumer credit information.
Coovadia argued, with the support of Credit Bureau Association and the Credit Providers Association, that comprehensive credit information was vital for the assessment of risk.
"Our view is that incomplete credit history will pose a challenge for credit providers in respect of building credit scoring systems," Coovadia said.
