The Department of Trade and Industry (dti) has published regulations for the removal of Adverse Credit Information, which as of April 2014 indicates that all adverse information of a consumer who has paid up their debt is removed from credit bureaus.
Dti Minister Rob Davies said it had been noted that in several cases bad credit records of consumers that have paid up their debt still remained blacklisted by credit bureaus and that proper affordability assessments to acquire debt had not been done.
He was briefing reporters on Thursday 27 February, a day after the publishing of the removal of Adverse Consumer Credit Information and Information relating to paid up judgement in the Government Gazette.
Information obtained by government had shown that affordability assessment for debt had been “lazily applied”.
In some instances consumers, who had paid up their debt, were still found to be blacklisted because the process to get one’s name off the list was a costly and lengthy one involving courts.
This would create an impediment for people to find jobs, among others.
“We need to clear the slate as we introduce a new system through the new bill. What we are saying is that adverse terminology that’s applied to people must be removed as well as the names of all people that have paid up a judgement against them,” said Minister Davies.
Minister Davies announced that as of 1 April 2014, credit bureaus will be prohibited from displaying or providing information that ought to be removed in terms of the notice to anyone.
“From 1 April 2014, this information will no longer be able to be supplied by the bureaus to anybody whose wanting to make use of that information in the course of a credit transaction or any other reason. They [credit bureaus] will then have two months after that to do the administrative work of taking [information] off their records,” he explained.
Following the removal of the information, credit bureaus will then have to submit an independent audit report to show that the removal has been done.
They will not be able to use it from 1 April, after the two months they must have taken off the information and they must submit an audit report to show that that is the case.
The public was encouraged to pay off their debt as they now will automatically be removed from the credit bureau record.
Zodwa Ntuli the deputy director general at the dti said that from information gathered a large number of consumers are credit impaired. Of the about 21 million credit active consumers, 50% are credit impaired.
“We are saying that the credit bureau system we’ve had up till now has been an impediment for many ordinary consumers. It hasn’t worked as a tool to avoid reckless transactions,” said the minister, while also urging credit providers that they must conduct proper affordability assessments.
“Part of the [National Credit Amendment] bill is that there will be regulations about standardising the affordability assessments.”
The removal of adverse information will benefit not only low income earners in particular but will also ensure that there is no reckless extension of credit.
Davies noted that while there was criticism of the previous amnesty that it did not work there was a difference with the current one. In 2007, credit amnesty was granted to allow consumers to start on a clean state following the passing of the National Credit Act.
“I think the difference between this and the previous amnesty is that in the previous amnesty you had to apply to get your name off. Individuals had to take the initiative whereas this one is a straight forward requirement on the credit bureaus themselves. We think this will be a more effective remedy for this problem.”
Ntuli added that engagement with credit bureaus had been positive.
“It was constructive engagement. They gave us a sense of how much time they would need to fully clear up the system,” she said, adding that bureaus had also expressed concern of the request they received from various institutions requesting information on consumers.
“They have appealed that it should be regulated properly,” she said of instances where prospective employers sought information on potential employees, which end being denied employment due to bad credit records.
“Yes it is important in some financial positions but it’s not equally important for other fields,” said Ntuli.
Davies added that the notice makes it clear that consumers remain liable to meet their debt. “The notice does not take that obligation away,” said Minister Davies. – SAnews.gov.za