Johannesburg - Trade and Industry Minister Rob Davies “rejected with contempt the suggestion that this – the removal of credit information – is an election stunt; it has nothing to do with the elections”, he said yesterday, explaining that it was a response to what had followed in the wake of a rapid expansion of unsecured lending.
Davies said within the next three months the proposals to remove adverse credit information from credit bureau records would be implemented. The minister stressed that this was not a credit amnesty but the removal of credit information.
The government has chosen to implement what it had termed the “medium-risk proposal”. This involves the removal of all adverse information listings irrespective of value and regardless of debt non-payment.
In addition, it involves the removal of all paid-up adverse information listings on an ongoing basis and the removal of all paid-up judgments on an ongoing basis.
The government has estimated that the proposal, which will include mortgage and car-related debt, will affect just over 1.6 million consumers. However, industry sources say the numbers affected will be considerably greater.
In a presentation prepared for credit providers, the Department of Trade and Industry noted some months ago that this “medium-risk” proposal would result in “a small increase in credit providers’ risk portfolios and may result in some smaller credit providers’ closure and in a marginal decrease in the supply of credit”.
Davies acknowledged the warnings from various parties, including banks and ratings agencies, that by removing critical information the proposed changes would increase the risk and therefore the cost of borrowing.
“We are not ignoring anybody. When we have a process like this it is inevitable that some people will oppose it and some will support it,” he said, adding that the proposal that had been selected had been developed to address the major concerns.
The department hoped that the removal of the information would provide relief to consumers who had been listed at credit bureaus and “enable them to access credit if they can afford it, pay less for credit and to obtain employment and rental accommodation”.
An adverse listing at a credit bureau often prevents individuals from accessing accommodation and employment.
Zodwa Ntuli, the deputy director-general at the department, stressed that although adverse information listings would be removed, “the payment profile information, which reflects how an account is paid on a monthly basis, will not be removed from the credit records of consumers”.
Capitec, which is a major unsecured lender, has frequently said that the proposed removal of adverse listings would not affect its credit granting because it did not affect its ability to access the borrower’s payment profile, which Capitec regards as critical information.
Davies said the Department of Trade and Industry, through the National Credit Regulator (NCR), was busy introducing affordability assessment guidelines in an effort to rein in reckless lending.
“With proper affordability assessments and the retention of the payment profile information, credit providers will be able to ensure that consumers who are already over-indebted do not obtain more credit.”
He noted that not all of the 1.6 million consumers affected by the removal of the listings information would automatically be able to access more credit as this would depend on the outcome of a more robust affordability assessment process. Davies also said that the NCR would undertake an education and awareness campaign to assist consumers to understand their finances better and be more honest in disclosing their financial status to credit providers.
Neither African Bank nor Capitec were available to comment yesterday, however, one industry source questioned why the government did not delay implementation of the move until after the affordability assessment guidelines were implemented and the education campaign was rolled out. - Business Report