Credit industry calls for clarification on amnesty

The credit industry is still in the dark about the details of the credit information amnesty proposal, approved earlier this month by Cabinet, and has appealed for sufficient time to make the necessary changes to its information databases.

The Credit Bureau Association (CBA), which represents credit bureau members, is waiting for more information on the implementation, and nuts and bolts of the amnesty.

A statement issued by Natasha Horwitz, CBA executive manager, said that the sector hoped that the government would “give due consideration to implementation dates, as credit bureaus and other industry stakeholders need to adequately prepare for the successful implementation of affordability guidelines”.

Trade and Industry spokesperson Sidwell Medupe said a notice would be released on September 30 for public comment, which would be evaluated by Trade and Industry Minister Rob Davies, who would then issue a final notice.

The removal of adverse credit information would then be implemented.

Cabinet issued a three-paragraph statement on September 5 referring to what it called the removal of adverse credit information project.

The statement gives little detail of how this highly contentious amnesty, which the banks have accused of being pushed through for political reasons, is to be implemented.

It said only that Cabinet had approved recommendations by the National Council of Provinces’ (NCOP’s) select committee on trade and international relations.

In championing the amnesty, the NCOP voted for the once-off removal of all adverse information from consumers’ credit records, irrespective of value, even if the debt had not been paid.

The council’s select committee opted for the medium-risk option put forward by the department of trade and industry in its presentation to Parliament, which is expected to affect only about 1.5-million consumers.

However, the National Credit Regulator said that of the 20-million active credit consumers in South Africa, 47% were considered to be impaired in that they had accounts which were three months or more in arrears and judgments and adverse listings.

The department admitted in its report-back in August that “this proposal would result in a small increase in credit providers’ risk portfolios, and might result in the closure of smaller credit providers and a decrease in the supply of credit”.

The proposal, as put forward by the NCOP, would also result in adverse listing and judgments being removed from all credit records.

Hopes of the credit industry that the government would go for the lowest-risk option have been dashed.

That option would have allowed for the removal of credit listings with a value of R10 000 or below, irrespective of non-payment, 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 second part of the NCOP’s ­recommendations require paid-up adverse information and paid-up judgments to be removed from consumer credit records on an ongoing basis.

The onus is on consumers to send proof to credit bureaus that the default or judgment has been paid.

Natasha Horwitz said that the second part of the amnesty proposal would give consumers an incentive to pay off the debt, but more public education was needed.

“Our concern is that many consumers may mistake the credit information amnesty for a blanket debt pardon, and that is not what the amnesty is.

"Consumers must know that even with the amnesty, loans, accounts and other forms of credit must still be serviced until the ongoing debt is paid up.”

The new plan would make it easier for defaulters to remove their bad-debt record, which previously required appearance in court.

The view put to Parliament was that many consumers were hampered from obtaining credit by the three-to-five-year retention of ­relevant records.

Davies rejected the industry’s concerns, saying the removal of adverse credit information would simply mean that credit providers would have to conduct proper affordability assessments on all prospective clients.

Banking Association managing director Cas Coovadia has been outspoken in his criticism, accusing the government of having a political motive for pushing this amendment through ahead of elections.

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