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PROPOSED CREDIT INFORMATION AMNESTY

PROPOSED CREDIT INFORMATION AMNESTY. SUBMISSION BY NATIONAL CREDIT REGULATOR. RATIONALE. To remedy the defects of the first credit information amnesty .

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PROPOSED CREDIT INFORMATION AMNESTY

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  1. PROPOSED CREDIT INFORMATION AMNESTY SUBMISSION BY NATIONAL CREDIT REGULATOR

  2. RATIONALE • To remedy the defects of the first credit information amnesty. • To provide renewed opportunity through the removal of barriers to finance to those adversely affected by the global economic recession. • To assist credit impaired consumers to both access credit and pay less for credit. • To reduce the cost of credit repair. • To increase access to capital and to stimulate increased consumer demand and consequent economic growth. • To assist those consumers who are unable to obtain employment due to the impairment of their credit records. • To achieve the goals of the NCA.

  3. PROPOSAL • any dormant account information be removed; • any Adverse Information listing be removed on prima facie evidence of settlement; • any judgment granted during 2006-11 equal or below R10,000 be removed, irrespective of non-payment (but not "written off"); • that judgments above R10,000 granted during 2006-11 be removed from any and all credit records, on submission of evidence of settlement.

  4. ALTERNATIVE PROPOSAL • any dormant account information be removed; • any Adverse Information listing be removed on prima facie evidence of settlement; • any judgment granted during 2006-11 equal or below R5,000 be removed, irrespective of non-payment (but not "written off"); • that judgments between R5,000 and R50,000 granted during 2006-11 be removed from any and all credit records, on submission of evidence of settlement.

  5. IMPACT • The scope of the first amnesty was wide BUT the impact on credit acceptances was small. • The proposed amnesty removes most conditions and increases the monetary scope in order to remove more negative information. • Likely impact of proposed amnesty is far greater but need Predictive Study, using scoring methodologies, to calculate the actual effect on acceptances and pricing. • Impact will be reduced by countervailing measures, such as affordability guidelines.

  6. CONCERNS • The proposed amnesty risks stimulating unhealthy credit consumption • The timing of the proposed amnesty is wrong • Credit providers need as much credit information as possible • Consumers with un-impaired credit records could be adversely affected Objections, while valid, are largely capable of resolution through affordability guidelines and better use of payment profile information.

  7. COUNTERVAILING MEASURES • Binding guidelines or other measures as to affordability testing are crucial to reduce reckless borrowing and lending • Binding guidelines or other measures as to credit life insurance to reduce over pricing • Binding guidelines or other measures as to the process of listing adverse information to reduce inconsistency and re-listing

  8. POSSIBLE ADDITIONAL MEASURES • Requiring judgment creditors to abandon judgments following settlement; • Requiring subscribers to credit bureaux, following settlement of the related account, to remove the associated Adverse Information listing; • Requiring the free provision of financial literacy material on application for credit; • Requiring that no person attempt to collect a debt that would, at face value, be deemed to have prescribed in terms of the Prescription Act; • Possible referrals of collusive price fixing to Competition Commission.

  9. NEED FOR ANALYSIS It is recommended that Government first assess the impact of the Recommended and Alternative Proposals outlined above using predictive scoring methodologies, in conjunction with registered credit bureaux, and the credit industry before proceeding further with the proposed amnesty.

  10. NEED FOR CONSENSUS • As with the first amnesty, the proposed amnesty should seek to build consensus amongst credit providers, credit bureaux, the NCR and Government as to the scope of and means of giving effect to the provisions of the proposed amnesty.

  11. CONCLUSION • Provided countervailing measures are taken to correct systemic issues the proposed amnesty could have a positive impact on the economy and benefit millions of credit impaired consumers.

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