The credit amnesty, granted to deeply indebted consumers with adverse credit records in April 2014, appears to have failed, as rapidly escalating numbers of adverse listings pile up.
Kirsten Halcrow, the CEO of EMPS, the oldest background screening company in South Africa said there had 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% before the credit amnesty was introduced. After the amnesty, the percentage dropped substantially to around 10.5%. Now, 16 months after the amnesty, the percentage is already up to 16% and climbing.”
On 26 February 2014, the dti published regulations for the removal of adverse listings from credit bureau records and these came into effect on April 1 2014. All records relating to adverse consumer credit information including information on consumer behaviour, enforcement action and paid up judgements had to be removed. SARS judgements are not removed, as they are seen as criminal offences, rather than financial defaults.
Halcrow said about 2.8 million consumers benefited from the amnesty. “Credit records are not checked for all job applicants. 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. We consider it of vital importance that credit checks are carried out on individuals who are being considered for these job categories.
“One piece of advice that I can share with candidates who have adverse listings is to voluntarily have themselves placed under debt review. That will show a prospective employer that the job applicant has taken responsibility for his or her indebtedness and is doing something positive to change the status.”
According to the National Credit Regulator (NCR), credit bureaus currently held records for 23.11 million credit-active consumers. Of these, only 12.7 million are considered to be in good standing.
Consumers have not changed behaviour
Neil Roets, CEO of debt management company Debt Rescue, said there was clear evidence that consumers had not changed their behaviour and that the credit amnesty had largely failed to change consumer behaviour. “More than 50% of all consumers are three months or more in arears. 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.”
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 also offers them the opportunity to pay back their debt in smaller instalments over a longer period of time. There is no doubt that the situation is deteriorating because we are seeing ever greater numbers of consumers approaching us to be placed under debt review,” Roets concluded.