The minister of trade and industry, Rob Davies, has set the stage that will give black listed consumers a new lease of life.
In a long speech Davies laid out useful details of new regulations: The Removal of Adverse Credit Information and Information Relating to Paid Up Judgments. These regulations together with the National Credit Amendment Bill (NCAB) promise a new era in the consumer credit market.
The regulations, said Davies, come into effect on 1 April 2014. From that date credit bureaus must remove all historical adverse information within two months (April and May 2014).
“Therefore effective from 1 April 2014 credit bureaus are prohibited from displaying or providing information that ought to be removed in terms of this Notice to anyone. The credit bureaus must within thirty (30) days after May 2014 submit a report by an independent auditor confirming that all such information has been removed.”
Davies added that “This Notice is applicable automatically to all affected consumers, unlike the 2007 amnesty whereby a consumer was required to follow a particular process to benefit from the amnesty. This means a consumer who may not even be aware of this Notice will nevertheless benefit.”
Once the relevant information is removed in terms of this Notice, no credit provider may use that information again in respect of a consumer applying for credit. This goes for companies that use this information incorrectly to deny South Africans employment. Credit bureaus must not provide such information to anyone for any reason.”
Davies stressed that the new regulations are not about removing the obligation on consumers to re-pay debt owed by them to credit providers. Instead, said Davies, they seek to create the incentive for consumers to re-pay their debt better and timely.
“Through this process, we also seek to encourage consumers to approach credit bureaus to check their credit records, and to move with speed to settle amounts owed on judgments so their clean credit record can be restored immediately.”
Davies noted that the review which led to the new regulations was at first met with some negative reaction.
“Some alluded that a credit amnesty will not be in the interest of the economy as credit providers will not be able to assess the risk in extending credit, and that credit will be extended recklessly. Also, it was stated that credit providers will be reluctant to extend credit, or that where they do, they will extend credit at significantly high costs.”
I want to assure you that all these concerns were taken into account.
Davies added that he will within six months review the regulations to close gaps in the credit industry’s Affordability Assessment Tests.
One of the key pillars of the National Credit Act is the requirement for credit providers to conduct affordability tests before extending credit to consumers, said Davies. “The research we commissioned for the purposes of assessing the feasibility of removing adverse consumer credit information has revealed glaring gaps in how these tests are conducted by credit providers. In some instances these affordability tests are not conducted at all. The NCR investigations and recent actions against credit providers show this worrying tendency.”
He said failure to conduct these affordability tests has results in reckless loans being extended to consumers that are already over-indebted, thus impacting on their ability to repay such loans. “In Marikana alone, the NCR investigated eleven (11) credit providers, and all were found by the NCR to have contravened the Act and referred for prosecution.” Of primary concern also, said Davies, is the trend among credit providers to lazily use blacklisting at the credit bureau as the substitute for affordability test. “It is not uncommon for a consumer to be declined credit purely on the credit bureau blacklisting without even conducting the affordability test. But what we find strange is where a consumer is declined for a home loan, but accepted for a personal unsecured loan of the same amount as in the declined home loan application. This shows that to some credit providers profits at times prevail over affordability to repay credit.”
“The NCAB provides for the Minister to issue regulations to ensure uniformity and consistency in conducting affordability tests,” said Davies.
Further, we have been inundated with correspondence from the public showing clearly that the blacklisting at the credit bureaus has now become a new impediment to employment opportunities.
“We caution companies to refrain from using the blacklisting information held by credit bureaus incorrectly to deny people employment. We accept that in some financial positions, such as those in the banking sector, the credit bureau information can be used as a reference in considering persons for employment in that sector. However, we will not allow the continued abuse of consumer credit information held by credit bureaus for dubious reasons. We have impressed on the NCR to monitor the use of consumer credit information held by the credit bureaus very closely.”