By Danica Hansen

A new court ruling says consumers no longer have to provide payslips or bank statements when applying for credit. Considering the South African population, abuzz with informal
traders, freelancers and self-employed entrepreneurs, the “old school” requirement of producing payslips and statements has been deemed inappropriate by retailers. Clothing retailers Truworths, Foschini and Mr Price went to court to challenge why proof of income must be a prerequisite for credit applications.

Law firm Norton Rose Fulbright represented the retail giants in court and won the case against the National Credit Act (NCA) on 16 March at the Western Cape High Court in a hearing overseen by Judge Keith Engers.

While the credit applicant will still be required to provide authentic identification they will no longer need to provide any particular form of documentation proving their income. National Credit Regulator (NCR) Company Secretary, Lesiba Mashapa said that the NCR is not happy with the judgment for setting aside the entire regulation 23A (4) even for consumers who are formally employed and can produce payslips and bank statements. “The judgment removes the income verification requirements entirely from the regulations
even for consumers who can produce payslips and bank statements.”

The NCR is taking legal advice with a view to appealing the judgment. In the meantime,
the NCR appeals to credit providers to continue to apply the income verification standards set by the regulations to protect themselves and consumers from reckless lending and borrowing. “Credit providers are reminded that section 81(2) of the National Credit Act requires them to take reasonable steps to assess consumers’ financial means before granting them credit. They should request consumers to produce proof of income,” said Mashapa.

Director of Financial Services for The Foschini Group (TFG), Jane Fisher said that the Western Cape High Court has set aside stipulations in the National Credit Act that required credit applicants to produce three months’ worth of payslips or bank statements as proof of income. “This is the only aspect that will be set aside and the rest of the Act remains unchanged. Retailers have argued that this requirement discriminated against South Africans, particularly those in the informal sector, who did not have bank accounts or salary slips. The unintended consequence of this was the informal sector was unable to qualify for responsible credit as a result of these requirements,” said Fisher.

According to Fisher, TFG has always applied a rigorous credit scoring process in order to assess whether a customer should be granted credit, even prior to the introduction of these affordability regulations in September 2015. “As a responsible credit provider,
with credit lending policies which are in line with international best practice, the Group will continue to conduct fair and objective assessments,” added Fisher.