NELSON Mandela Bay financial experts have warned that the new credit amnesty announced this month is not a “get out of jail free card” for debt.
From April 1, new regulations came into place that allow for a credit information amnesty. Many people have raised questions about how it will work and whether consumers are still liable for their debt.
Consolidated financial planner Alec Riddle said the amnesty did not mean consumer debts disappeared.
“A regulation has been passed, which is called the Removal of Adverse Credit Information and Information Relating to Paid Up Judgments. The regulation stipulates that registered credit bureaus will have two months to remove the above information, which largely relates to the negative credit history of South African consumers.
“In essence, people who had bad credit records were struggling to secure finance, even though their position may have improved, due to a bad credit record from way back when,” Riddle said.
Credit provider Wonga.com SA chief executive Kevin Hurwitz said it was essential that consumers understood the new regulations and how they would affect them.
“Effectively this means that negative records, which had been held by the credit bureaus, showing how a consumer previously managed or [mismanaged] their debt obligations will no longer be held on record and won’t be visible to credit providers,” he said.
In addition, credit bureaus would also be required to automatically remove any adverse credit information as soon as a consumer had repaid the outstanding debt. Previously, once a judgment had been paid up, the consumer had to approach the court to have the listing of the judgment removed.
Hurwitz said most credit providers would be implementing stricter credit vetting processes. “To date, a number of credit providers have relied solely on the information from credit bureaus without doing proper risk assessments before credit was granted to consumers. However, the introduction of the new regulations will require lenders to introduce stricter credit approval controls.”
He urged consumers not to use the amnesty as an excuse to continue mismanaging their debt. “Consumers need to take ownership of their debt and credit profiles. Credit bureaus provide one free credit report a year to consumers and they are encouraged to obtain these in order to be clear about their debt obligations, as well as pick up any irregularities on their credit profile.”
Riddle said that being blacklisted before the amnesty was harmful as it subsequently affected the job prospects of applicants.
“The key will be to pay off the capital portion of any debt or judgment going forward, which means the judgment will disappear automatically. If you do find yourself in debt, seek professional help or advice. Do not … bury your head in the sand,” he warned.
Debt Smart Port Elizabeth debt counsellor and co-owner Gaynor de Kock said she had been inundated with calls from consumers who wanted to know how the amnesty worked.
“People think they can walk away and not pay their debts. A lot of people who have been in debt will now go into the credit market.” – Cindy Preller