Support for proposal to clear bad credit info

Briefing reporters ahead of his meeting with the National Council of Provinces (NCOP) later today, Davies said the department had received 98 comments on the adverse credit information proposal.

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The department had published in the Government Gazette a notice requesting public comments on the proposal. The due date for comments was at the end October.

Through this, consumers who had been blacklisted by the credit bureaus - but had since settled their debt - would have their names removed from the credit bureau listings.

"What we are saying is that this exercise would remove that information, and would provide - particularly through the amendments that would come through the Credit Act - for an on-going removal once you pay up," said Davies.

Of the 98 comments, 66 supported the proposal, 15 had concerns and didn't support it, while 17 raised questions of clarity.

The dti had also thus far conducted public consultative sessions in six provinces, with the remaining sessions to be held in the outstanding provinces within the next two weeks.

"We are working to ensure that there is a greater onus to conduct a real affordability assessment and at the same time, we will engage in much more credit information campaigns to discourage people from being over indebted," said Davies.

It had been observed that real affordability assessments were not being conducted properly by credit providers in granting credit.

"What we've actually found is that instead of active affordability assessments being conducted by credit providers, we find that all that really is relied on is whether or not somebody's name is on a credit bureau, and your name can be on a credit bureau for years - even if you've paid off the entire debt."

The removal of adverse credit information will benefit close to two million consumers.

(Image: Wikimedia Commons)

Davies said this was seen as one way of solving the consumers' problems, as being blacklisted often dampened job prospects, among other things.

"Secondly, it will be linked to stronger measures to try to get much more responsible behaviour by credit providers through conducting actual affordability assessments of a more rigorous kind. That is what we are trying to do," he added.

The minister also pointed out that when the National Credit Regulator visited the Marikana community, following the tragic events of August 2012, it was found that of the 13 credit providers operating in that community, 11 were not complaint with one or other aspect of the Credit Act.

Davies said it was easy to get garnishee orders (an automatic deduction from somebody's salary before they get the salary), which some times take a sizeable chunk of a person's wages.

He said the obtainability of garnishee orders needed to be tightened, while credit providers must assess whether a person can afford credit or not.

"That assessment needs to be more robust than it has been up to now. We need to change behaviour if we do this removal of adverse credit information exercise.

"We will complement this with more robust requirements, in terms of affordability assessment; we also need to educate people about credit. What we have at the moment is an easy way of making credit available to people who can't afford it."

The removal of adverse credit information had previously been referred to as credit information amnesty.

"Credit amnesty doesn't mean that the debt is cancelled. That was one of the possible ambiguities that it would imply if you owe somebody some money, that debt is cancelled. That isn't the case [here]; it's the removal of the information off the credit bureau. That is what will be removed," stressed Davies.