Credit amnesty ‘proving futile’

Debt levels rise again after slates cleared

IRRESPONSIBLE financial behaviour is on the rise again.

This signals that South Africans did not change their spending habits after the credit amnesty granted to deeply indebted consumers with adverse credit records, which had aimed to offer consumers a clear slate‚ experts say.

EMPS chief executive Kirsten Halcrow said there had been a substantial increase in the number of negative listings for job applicants who were screened for potentially sensitive positions.

Her company is the oldest background screening company in South Africa.

“Over the past 10 years, job applicants with impaired credit records were running at 20% to 25% before the credit amnesty was introduced,” Halcrow said.

“After the amnesty the percentage dropped substantially to about 10.5% .

“It is now 16 months after the amnesty and the percentage is already up to 16% and climbing.”

In February last year, the Department of Trade and Industry published regulations for the removal of adverse listings from credit bureau records. These came into effect in April last year.

All records relating to adverse consumer credit information, including information on consumer behaviour‚ enforcement action and paid-up judgments, had to be removed.

SA Revenue Service judgments are not removed.

They are seen as criminal offences rather than financial defaults.

Halcrow said about 2.8 million consumers benefited from the amnesty.

“When applicants are being considered for employment in a position that requires trust and honesty and entails the handling of cash or finances, the regulations make provision for us to check their credit status,” she said.

“We consider it of vital importance that credit checks be carried out on [such applicants].

“Advice I can share with candidates who have adverse listings is to voluntarily have themselves placed under debt review.

“It will show a prospective employer that the applicant has taken responsibility for their indebtedness and is doing something positive to change their status.”

The National Credit Regulator says credit bureaus currently hold records for 23.11 million credit-active consumers.

Of these 12.70 million are considered to be in good standing.

Debt management company Debt Rescue chief executive Neil Roets said there was clear evidence consumers had not changed their behaviour and that the amnesty had largely failed to change consumer behaviour.

“More than 50% of all consumers are three months or more in arrears,” he said.

“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 12 months, which will prove the amnesty was an exercise in futility.”

He said the best way for consumers to get out from under their crushing debt burden remained the debt review option.

“Apart from the fact that the process offers legal protection against the seizure of their property by debt collectors‚ it offers them the opportunity to pay back their debt in smaller instalments over a longer period,” Roets said.

“The situation is deteriorating. There are numbers of consumers approaching us to be placed under review.”


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