In its 2013 annual report, released in March 2013, the DTI noted that there were 9.5 million consumers with impaired credit records (47.5 percent of all credit active consumers), which was an increase of about 500 000 over the previous year.
South African consumers can look forward to having any adverse credit information relating to them removed within no more than two months as of tomorrow. But this should not be construed as meaning that debts will be forgiven, industry players have warned.
Consumers, according to a poll, are also confused as to what the credit amnesty entails and how to go about restoring their credit scores.
The term “amnesty” is misleading; no debts are forgiven
There is a real fear that these new regulations could lead to lower levels of payment by debtors due to a mistaken impression that debts have been forgiven as implied by the word “amnesty”.
No debts – not a single cent - are forgiven. Consumers must still pay off any existing debt that they hold. The regulations stipulate that, from 1 April, registered credit bureaus will have two months to remove any negative information from the history of South African consumers.
This process, and how it will work, is not simple and it won’t be easy for consumers to understand exactly what information will be removed from their credit record, and what will stay.
Once removed, this information cannot be retained on the credit bureau’s register, nor can it be given to credit providers either after or during the two-month period (i.e. from 1 April).
After the two-month period has passed, credit bureaus are required to continue to remove information relating to paid-up judgments received by credit providers, who are themselves required to submit these and are not allowed to use adverse consumer credit information for any reason, including credit scoring and assessment.
No need to go to court
If a consumer has a judgment, and has paid the capital portion of their debt in full, they will no longer need to go to court to rescind the judgment. Instead, it will be done automatically and consumers will not need to pay excessive legal fees.
This will also ensure that their credit record will not reflect in the judgment and that they are not negatively affected when applying for a job or rental contract. This is an extremely important step, and it saves consumers from additional costs of engaging a lawyer to remove the paid up judgments.
Once consumers have paid their debt in full, black marks listed on their credit record for things such as late payments, missing payments, not paying at all or avoiding credit providers would be automatically removed.
According to the Department of Trade and Industry (DTI), the regulation is necessary because, among other things, credit information can harm employment opportunities. It also says that those consumers whose financial positions have changed should be given the ability to start on a clean slate and maintain a clean credit record going forward.
The DTI maintains that the credit amnesty granted in 2007 benefited only a handful of consumers because it required that consumers take certain steps to benefit from it, which barred those who were either not aware of this or did not understand the necessary steps to be taken.
No need for action on your part
Consumers won’t have to do anything as government has put all the responsibility on the credit bureaus. If, after June, you still have any negative information on your credit record you can contact the credit bureaus who will then have 7 days in which to remove such information.
Employers and credit providers will still be able to see whether you are currently in arrears on your debt. Credit amnesty only affects individual consumers and businesses with an annual turnover of less than R1-million.
Individual credit providers do not have to delete any adverse credit information, but they’re not allowed to use the information to make credit decisions. In practice, however, a consumer would find it extremely difficult to prove that a credit provider has used this information to deny them credit.
This credit information amnesty applies to any South African debt, even if it’s owed by a foreign national.