No maintenance? No bond!

Private Property South Africa
Martin Hatchuel

The government has proposed to block access to credit for anyone who’s found guilty of defaulting on their maintenance payments.

The statistics are staggering: more than half of the children in South Africa live apart from their fathers. And, while definitive figures seem difficult to procure, many authorities believe that the majority of those fathers fail to make their child maintenance payments*.

It’s a problem that government and civil society organisations have been trying to address for some time – with very little success. (Of course, the problem of mothers who fail to pay for the support of their children is very real one, too – but it’s far less common.)

Now, though, the Department of Trade and Industry appears to have come up with a simple intervention that might just make a huge difference: it has proposed to block access to credit for anyone who’s found guilty of defaulting on their maintenance payments.

The sheer numbers would suggest that this could have an affect on the property market: at least nine million (48%) of South Africa’s children live in single-parent homes.

Draft regulations

The measure is proposed in a set of draft regulations that will govern the assessment of credit applications when they come into force in the near future. The draft regulations lay open for comment from the public from the 1 to 31 August and, judging by various media reports, the suggestion regarding child maintenance was positively received by parties on both sides in parliament. (See, for example, City Press of 6 August: “Defaulting on child maintenance will affect your credit record”.)

The National Credit Act already requires banks to establish applicants for home loans to establish the borrower’s income, monthly expenses, and debt repayment obligations: the new regulations will now include child maintenance in the picture.

Impaired credit records

According to a statement issued at the beginning of August by the DA’s Shadow Minister of Trade and Industry, Geordin Hill-Lewis, this is significant “because it means that maintenance defaulters will now have their credit records impaired, for the first time. This will stop defaulters accessing new credit while ignoring their maintenance responsibilities.”

He said that the Maintenance Act would need to be amended to enable the credit bureaux to show maintenance default judgments on consumer’s credit profiles.

“The format of maintenance judgments will be changed to ensure that the details of minors is not included, which will then enable these judgments to be uploaded to the credit bureaux.

“The Department of Justice has already drafted a Bill to amend the Maintenance Act to make this a reality. This Bill will go even further, enlisting the assistance of credit bureaux in tracking down defaulters who can't be found. We are told the Bill will go before Cabinet within the next six weeks, and will be tabled thereafter.”

Effect on home loans

Richard Gray, CEO of Harcourts Real Estate, said that the National Credit Act “sets out very stiff penalties for anything perceived to be ‘reckless’ lending, and we all know how this has affected home loan lending over the past few years, with the banks tending to err very much on the side of caution.

“Now with maintenance payments added to the list of debt obligations they must include in their calculations, and maintenance defaults to be included when it comes to credit scoring, it is very unlikely that anyone who is neglecting their maintenance obligations will be able to obtain a home loan – or any other kind of credit, for that matter.”

  • Resources

First Steps to Healing the South African Family by Lucy Holborn & Gail Eddy Published by the South African Institute of Race Relations, and sponsored by the Donaldson Trust (2011)

“So we are ATM Fathers” A study of absent fathers in Johannesburg, South Africa by Mazembo Mavungu Eddy, Hayley Thomson-de Boor, and Karabo Mphaka published by the University of Johannesburg’s Centre for Social Development in Africa (2013)

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