Johannesburg – A background screening company is warning that the credit amnesty, granted to those in over their heads last year, has backfired because adverse listings are piling up.
The state earlier this year allowed heavily indebted consumers the opportunity to wipe the listing slate clean, although this did not expunge the debt. This credit amnesty, which pertains to credit records, came into effect last April.
Under the new, controversial, regulations, all registered credit bureaux were required to remove adverse consumer credit information on their systems until the end of May 2014.
Information that needed to be removed from profiles included the classification of consumer behaviour, such as “delinquent, default, slow paying, or absconded”, and enforcement action like “handed over for collection, legal action or write-off”.
The credit bureau also needed to remove details and results of disputes lodged by consumers, irrespective of the outcome. In addition, information around paid up civil court or default judgments also had to be removed from credit records, although judgements secured by the South African Revenue Service, seen as criminal offenses and not financial defaults, are not removed.
Kirsten Halcrow, CEO of EMPS, the oldest background screening company in South Africa, says – following this amnesty period – there has been a substantial increase in the number of negative listings for job applicants who were screened for potentially sensitive positions.
“Over past 10 years, job applicants with impaired credit records were running at between 20-25 percent before the credit amnesty was introduced. After the amnesty the percentage dropped substantially to around 10.5 percent.”
Yet, 16 months after the amnesty, the percentage of those with impaired records is climbing, and is already at 16%, says Halcrow.
Halcrow says about 2.8 million consumers benefited from the amnesty.
According to Kroll Mie, under the amended National Credit Act, credit records can be accessed when companies:
• Certify the request for consumer credit information relates to a position requiring honesty in the handling of cash and finances;
• There is a job description in place that stipulates the requirement of trust and honesty in the handling of cash or finances;
• Specific and informed consent of the consumer is obtained prior to the request being made.
According to the National Credit Regulator (NCR), credit bureaus hold records for 23.11 million credit-active consumers. Of these, only 12.70 million are considered to be in good standing.
Neil Roets, CEO of debt management company Debt Rescue, says there is clear evidence that consumers had not changed their behaviour and the credit amnesty had largely failed to change consumer behaviour. “More than 50% of all consumers are three months or more in arrears.
“Many South Africans saw the credit amnesty as an opportunity to stack up new debt because their adverse listings had been removed and they were therefore eligible to borrow more money.
“It is my belief that we will be back to the pre-amnesty percentage of adverse listings within the next six to twelve months which will prove that the amnesty was an exercise in futility.”