Relieving Consumer Overindebtedness in South Africa: Policy Reviews and Recommendations

A large fraction of South African consumers are highly leveraged, inadequately insured, and/or own little to no assets of value, which increases their exposure not only to idiosyncratic risk but also to severe indebtedness and/or default. This scenario can present negative ramifications that lead well beyond the confines of individual households. Thankfully, it can also be remedied by well-tailored legal debt relief mechanisms. This article reflects on the uncertainties surrounding the consumer debt relief framework of the National Credit Act in an attempt to show why it is not up to the challenge of providing meaningful relief to debt-distressed consumers. Ultimately, a comprehensive review of the current framework in favor of a discharge mechanism on simple, stated terms is proposed.