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Ombud can help you clear your name with credit bureaus if you are retrenched

Published Jun 25, 2010

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If you have been blacklisted by the credit bureaus due to circumstances beyond your control, such as retrenchment, the good news is that the Credit Ombud may be able to help you to remove the blacklisting from your credit profile.

Normally, a blacklisting will remain on your credit profile for up to five years, even if you subsequently repay the outstanding debt.

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Manie van Schalkwyk, the Credit Ombud, says you must meet the following requirements:

- The debt default must be due to circumstances beyond your control, such as retrenchment;

- You must provide the ombud with proof that you notified the credit provider of your retrenchment timeously; and

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- You must verify that you have since paid the debt in full.

Van Schalkwyk says he will then look at your payment behaviour before you were retrenched. He will also check if you made alternative payment arrangements with your credit providers and if you honoured those arrangements.

Being blacklisted by a credit bureau means that you cannot get more credit, with the result that you cannot buy a car on hire purchase or take out a home loan.

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Many consumers who have lost their jobs due to the recession are likely to find that they have been blacklisted by credit bureaus, because they can no longer honour their debts, Van Schalkwyk says.

Figures released in May by Statistics South Africa show that 25 percent of the working population (those deemed to be economically active) were unemployed at the time. According to Adcorp, the largest recruitment company in South Africa, more than 5.5 million adults are out of work.

The Adcorp Employment index fell sharply in May this year, compared with the same period last year. The index shows that 75 percent of more than a million jobs lost during the 2009/10 recession were lost by people under the age of 34.

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The high level of unemployment means that a large number of consumers who previously were able to meet their financial commitments are no longer able to do so.

Your creditors (the businesses that you owe money) file information that affects your credit profile (whether you pay on time or are a slow payer, or whether you have defaulted on repayments) with the following credit bureaus: Experian SA, Compuscan Information Technologies, Consumer Profile Bureau, KreditInform, LexisNexis Risk Management, Micro Lenders Credit Bureau, Transunion ITC and Xpert Decisions Systems (XDS).

Other creditors use the information filed at the credit bureaus to give you a credit score when they assess whether or not you qualify for a loan or credit.

But it is not only negative information that is recorded on your credit profile. Your credit profile will also reflect, for example, if you always pay your repayments on time and if you pay your debts before they are due.

The number of adverse credit listings increased from 26.5 percent of all credit listings in December 2008 to 27.9 percent in December last year, Vivian Pather, the managing director of XDS, says.

Although the National Credit Act (NCA) entitles you to access one free copy of your credit profile each year, Pather says only one percent of credit-active consumers requested free reports last year.

"The credit reports are viewed as confidential, and to prevent this information falling into the wrong hands, the credit bureaus will ask you to confirm your personal details," he says.

With XDS, you can access your credit report by sending an SMS that contains the word "free" to 37996. You will be directed to XDS's mobile website, where you have to register by entering your full name, identity number and cellphone number and choosing a password. You will be asked to verify certain details (these vary and could include your address and details of one or more of your accounts) as part of an authentication process before you can access your credit report on your cellphone screen.

Although the service is quick and easy (Personal Finance tried it), the SMS will cost you R1.50.

XDS says the charge of R1.50 is to cover the cost of providing the service and the company does not earn any revenue from this service.

Credit bureaus require that you send them copies of your identity document and proof of address so they can verify that they do not release your confidential financial information to unauthorised people.

In terms of the NCA, credit bureaus must safeguard both the information they store about you and the documents they request from you, such as copies of your identity document.

By the time of going to press, Transunion ITC was not able to respond to questions from Personal Finance about how you can rec- tify incorrect information on your credit profile, because the company's headquarters is not in South Africa.

WHAT YOU SHOULD DO IF YOU LOSE YOUR INCOME

If you have been retrenched and cannot meet your credit repayments, check if you have credit insurance and, if you do, the terms and conditions of your cover. Some credit insurance policies will cover your repayments for six months after you have been retrenched. Manie van Schalkwyk, the Credit Ombud, says that in other cases your outstanding debt will be settled in full by the insurer.

If you do not have credit insurance, you should notify your credit providers that you have been retrenched and try to work out a revised repayment plan.

For example, if you need to pay back your loan over two years, your credit provider may agree to give you a payment holiday of three months. Be aware that in such a case it is likely that the term of the loan will be extended by three months and you will pay more interest.

"It is important that you speak to your credit provider as soon as you are retrenched and that you check for credit insurance cover immediately. Don't wait until you fall behind with payments, because you may find that your credit insurance cover falls away as soon as you miss a payment," Van Schalkwyk says.

TIME LIMITS ON KEEPING INFORMATION ABOUT YOU

In terms of the National Credit Act, there are limits on how long certain information can remain on your credit profile. The types of information and their time limits are:

- The details and results of any disputes lodged by you about information on your credit profile. Time limit: 18 months.

- The number of inquiries made regarding your credit record, including the name of the person or company that made the inquiry. Two years.

- Payment profile. Details of any credit provided to you, the payments received and whether any payments were late. Five years.

- Adverse classifications of your payment behaviour. This includes classifications such as "delinquent", "defaulted", "slow-paying", "absconded" or "not contactable". One year.

- Notice that you are undergoing debt counselling or restructuring. Until your debt counsellor issues a clearance certificate.

- Civil court judgments. Any judgment granted by a court in a civil dispute between individuals or companies (this includes default judgments). Five years or until the judgment is withdrawn by a court or abandoned by the credit provider.

- Administration order. An order granted by a civil court in which the management and disposal of the assets of an insolvent person are awarded to a person appointed by the court until the insolvent person has paid his or her debts. Ten years or until the order is withdrawn by the court.

- Sequestration. A court appoints a trustee or administrator to take possession of your assets until your debts have been repaid or other claims have been met. Ten years or until a rehabilitation order is granted.

- Liquidation. A court places the property of a bankrupt person or company in the hands of a third party (trustee) to be divided among the creditors. No limit.

- Rehabilitation order. An order granted by a civil court that restores the financial standing or reputation of a person who was insolvent. Five years.

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