Johannesburg - Credit bureaus have been given until April 1 to remove adverse information on consumers who are deemed to be ‘credit impaired’ and also to remove information relating to paid-up judgments. The new regulation, which was gazetted on Wednesday, does not provide for a blanket removal of credit information. A consumer’s payment profile will remain on record with the bureau.
At a press conference yesterday Minister of Trade and Industry Rob Davies stressed that the removal of adverse information did not remove the obligation on consumers to repay debt owed by them to credit providers. “Instead it seeks to create the incentive for consumers to repay their debt better and timely.”
Davies said that at present there was little incentive for consumers with adverse credit ratings to repay, as it did not result in the rating being removed. He urged consumers to take advantage of the amnesty to get their finances in order.
Davies’ press conference took place just hours before the National Assembly discussed the National Credit Amendment Bill, which will see the introduction of a tougher legal environment for credit providers.
Davies said the way in which the credit bureaus worked had been abused and resulted in many of them not adhering to their legal obligation to undertake an affordability check when they extended credit.
“Basically one test was applied lazily, the credit provider would check with the credit bureaus to see if the consumer was blacklisted and if he/she was they didn’t get any credit.”
In many instances consumers who were employed but would have failed an ‘affordability’ test were granted credit because credit providers knew they could issue garnishee orders against them.
An additional concern of the government was the large number of people who had repaid debts but remained on a blacklist and were not only unable to access credit, but also risked being rejected for jobs and rented accommodation by employers and property owners who referred to credit bureaus.
A similar requirement to remove adverse information was put into force in 2007. A large percentage of the relatively small number of consumers who took advantage of that amnesty was soon afterwards again negatively listed.
Davies said a weakness of the 2007 amnesty was that it required consumers to take certain steps to activate it. In terms of the new regulations, the onus is on the credit bureaus to remove the information. The credit bureaus will be required to submit reports to this effect to the National Credit Regulator and the Department of Trade and Industry (dti).
A spokesman for Standard Bank said it welcomed the fact that the payment profile, which was crucial in assessing a customer’s creditworthiness, would remain with the credit bureaus. “Standard Bank is satisfied that the minister has struck the appropriate balance between consumer protection and the need of credit providers for reliable and accurate credit information,” a spokesman for the bank said, adding that the main concern was the short time in which the changes had to be made. - Business Report