The real truth about ‘credit amnesty’

The much-anticipated Removal of Adverse Consumer Credit Information, with an implementation date of 1 April, has finally arrived. Millions of consumers across the country have eagerly awaited the day they will receive a ‘pardon’ for their credit sins and start afresh, with hopes of once again being able to access much-needed credit.

Credit Ombud Manie van Schalkwyk states, “The Regulations that have been debated over the past year or so have finally come into force, and we will now see the real effects of removing adverse information from consumers’ profiles as well as the effect on the credit industry as a whole.”

According to the National Credit Regulator’s Credit Bureau Monitor statistics, close to half of the recorded 21 million consumers have impaired credit records. This ranges from consumers with defaults, judgments, admin orders, as well as consumers who are three months or more in arrears with their account payments. Van Schalkwyk comments, “In our experience, for a big percentage of cases, consumers were not able to meet their contractual obligations because of financial problems as a result of over-indebtedness. The reasons for over-indebtedness will vary from retrenchments, divorce, or other changes in personal circumstances to reckless credit. The recent rise in the cost of living as a result of increases in the price of food, petrol, and e-tolls costs also had a significant effect on consumers’ ability to service their debts.”

Who Stands to Benefit?

What is noteworthy, and what people really need to grasp, is that not all of the 9.8 million consumers with impaired records will benefit from this exercise. “It is only about 28% of the 21 million credit-active consumers, equating to about 5.78 million consumers, who may qualify to benefit from the removal of adverse information,” adds van Schalkwyk.

Taking a closer look at the 28% of consumers who stand to benefit from the removal of adverse information, 15.4% will definitely benefit as they fall squarely within the adverse listing category which accommodates defaults, while a further 12.6% may benefit because they fall within the category of consumers who have judgments and admin orders on their credit reports.

“The Regulations also stipulate that information relating to paid-up judgments must be removed. At present, it is difficult to ascertain how many of the 12.6% relate to judgments and how many of those judgments have been paid up, in order for the consumers to qualify to have these removed from their profiles,” says van Schalkwyk.

Debunking Myths About Credit Amnesty

In the lead-up to 1 April, there have been many misconceptions regarding exactly who will benefit, what information will be removed, and even when it was going to be implemented. Let’s debunk some common myths regarding the Removal of Adverse Consumer Credit Information:

MYTH 1: All negative information will be removed from my profile, and I will be able to start on a clean slate.

FACT: According to the regulation governing the Removal of Adverse Consumer Credit Information, only two categories of information qualify for removal, namely adverse listings and paid-up judgments. Adverse listings include delinquent, default, slow paying, absconded, and not contactable classifications of consumer behavior, as well as adverse classifications of enforcement action taken by the credit provider such as handed over for collection or recovery, legal action, or write off, details and results of disputes lodged by consumers, and adverse consumer credit information contained in the payment profile. The adverse information reflected on consumers’ profiles as at 1 April 2014 will be removed – irrespective of whether it was paid or not. Payment profile information will not be wiped away as part of the cleanup exercise.

MYTH 2: All judgment information will be removed from a consumer’s records.

FACT: Only paid-up judgments which were taken between 2009 and 2014 (before 1 April) will be removed as part of the Removal of Adverse Consumer Credit Information exercise. Older judgments should have been removed already due to the maximum retention period of 5 years.

MYTH 3: A credit provider cannot pursue me for the debt once the default has been removed.

FACT: Even if the default information is removed from a consumer’s credit profile, they are still legally obligated to pay the debt. The removal of the information does not affect the creditor’s rights in any way.

MYTH 4: Bureaus only have 7 days after 1 April 2014 to remove information relating to paid-up judgments and defaults from a consumer’s profile.

FACT: The Credit Bureaus have until 1 June 2014 to remove all qualifying information, and it is only after this period that consumers will be able to lodge complaints if they find that the information has not been removed as it should have.

MYTH 5: Consumers are required to follow a process before they can benefit from the ‘amnesty’.

FACT: There is no process that consumers need to follow. There will be an automatic removal of all information pertaining to defaults and paid-up judgments before 1 June 2014. However, consumers are urged to access their credit records after this period and to check if defaults and paid-up judgments have, in fact, been removed.

What Lies Ahead

The second leg of the removal of adverse information will come into operation once the National Credit Amendment Bill is promulgated in the near future. “Once the bill is promulgated, consumers will, on an ongoing basis, have all paid-up defaults and paid-up judgments removed as soon as the credit providers provide the credit bureaus with proof of payment,” adds van Schalkwyk.

As the dust settles on these significant changes in South Africa’s credit landscape, consumers and credit providers alike will need to adapt to the new realities. It’s essential to stay informed and seek expert advice when navigating this evolving terrain.

In conclusion, while the Removal of Adverse Consumer Credit Information offers hope for many, it’s crucial to understand the specifics and manage expectations. South Africa’s credit landscape is evolving, and staying informed is the first step towards financial empowerment.

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