The transformation of the South African credit market

South Africa was the first African country to introduce a legal framework for the consumer credit market in 2005. More than six years after its introduction a public debate about over-indebtedness and unsecured lending received public recognition. It was caused by constantly increasing numbers of unsecured loans and growing levels of private indebtedness. Purpose of the research undertaken was the question why this problem arose after the implementation of the National Credit Act (NCA). This article shows that the competitive credit market itself, which was intended with the NCA, contains the tendency towards unsecured lending and, as a consequence, over-indebtedness. As remedies it discusses the option of compulsory credit counselling and the introduction of legal debt discharge. Credit counselling could level the asymmetry of knowledge between creditors and debtors. Strongly regulated options of legal debt discharge would follow an international trend in developed consumer societies with the purpose of reintegrating over-indebted citizens.