The 12th International Consumer Law Conference Blog

Organised by NALSAR and the International Association for Consumer Law

26th February: Over Indebtedness and Possible Solutions

Chair: Dr.P.V.R.Jagan Mohan Rao, Director, Finance and Comapny Secretary, Ind- Barath Power Infra Ltd (India)

Phumudzo Munyai, Professor, UNISA (South Africa) :How to Crub Over- Indebtedness and Enhance Consumer Welfare in South Africa: Lessons from Islamic Law


Over spending and easy credit is singled out as the single biggest cause of consumer over indebtedness in many countries. Little attention is paid to economic and monetary polices and practices as possible causes of consumer over indebtedness. In South Africa easy credit is generally blamed for consumer over indebtedness. The National Credit Act, 34 of 2005, was premised fundamentally on these assumptions. The Act protects unworthy borrowers from unscrupulous credit providers, there is little attention paid to the welfare of those credit worthy borrowers, once the credit transaction is concluded. A comparative study reveals that there are valuable consumer protection lessons South Africa can learn from Islamic Law, which denounces payments or receipt of interest. By efficiently protecting consumers against higher prices, in the form of interest, Islamic law provides obvious benefits for consumers, especially the poor who would otherwise not be able to avail the certain basic needs. The benefit of this approach is that is that resulting consumer satisfaction will boast confidence in our credit system while at the same time ensuring equitable resource distribution and balanced economic growth in the long term.



Vincente Gozalo Lopez, Assistant Proffesor, Universaity of Cantabria (Spain): Over Indebtedness in EU


House hold over indebtedness has been a wide spread problem for years, but Spanish law makes no specific provision for it. At most the Spanish legislation has created a number of institutions designed more as a means to prevent over borrowing by placing constraints on lenders advertising. Looking at statutory provisions, it is a fact that consumers in Spain are unprotected in insolvency proceedings. This is unusual, since leading European Union countries have implemented frameworks that enable a consumer who is undergoing economic hardship to negotiate a grace period for her debts, or once her attachable assets have been fortified, she may even have liability extinguished for any debts that still remain outstanding. It is the nonetheless to be borne in mind that law in these European states is very careful to ensure that this fresh start afforded to a household so that it can sustainable rebuild its domestic finances is not granted blindly or indiscriminately in the form of an absolute discharge, rather the law deliuates the conditions of varying strictness under which it is fair for a consumer to enjoy protection.  The consumer insolvency calls for a range of legislative decisions that remain unachievable by any interpretative approach to the positive law now in place. Any reform should preserve a number of principles that have been worked out in the legal doctrine has so far addressed the issue.


Philip Stoop, Lecturer,University of South Africa: South African consumer credit policy: measures indirectly aimed at resolving and preventing consumer’s over indebtedness


The Global economy has boomed during the last two decades and the boom is largely due to an increase in granting of credit and easy access thereto. However this economic boom came at a price since the number if individuals and business that are over indebted has reached new heights. Legislation protecting debtors and aimed at directly of indirectly preventing the problems of over spending in various ways is therefore an international phenomenon and this legislation differs from country to country depending on the needs of the specific country. Due to a considerable imbalance of power between the credit providers and consumers, low education levels, poorly informed consumers, weak disclosure and deceptive marketing practice, South African consumers also entered into unaffordable credit contracts and this over indebtedness caused many social problems. In order to align new consumer protection, the National Credit Act introduces regulatory measures directly and indirectly aimed at resolving over indebtedness of consumers. The purpose of this paper was to thoroughly address some of the indirect measures aimed at resolving and curbing over indebtedness in the South African credit industry and the role the indirect measures play in relieving problems connected with poverty and over- indebtedness in the context of the global economy



                      – Ayushi Mittal, IInd Year, NALSAR University of Law, Hyderabad     



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