South Africa continues to exhibit high levels of debt-to-disposable income along with a high number
of impaired credit records. The National Credit Act No. 34 of 2005 (NCA) was established in order to
address these high levels. This study expands the limited research by investigating the NCA’s ability
to reduce levels of over-indebtedness. The study employed quarterly data (2001-2013) in an OLS
regression model in order to establish the determinants of over-indebtedness and assess the impact
of the NCA. It was found that the macro-economic variables GDP, prime rate, property prices,
consumer consumption expenditure, debt-to-disposable income and the level of unemployment were
major contributors to the level of over-indebtedness. The NCA proved to have a positive significant
effect on the levels of over-indebtedness, indicating that the NCA had not succeeded in its purpose
of reducing the vulnerability of consumers to becoming over-indebted. The results suggest that the
affordability assessment of the NCA must be improved in order to conduct a form of credit stress
testing on consumers during their application for credit.