Credit Amnesty Project

1. Credit Amnesty Project Select Committee on Trade and International Relations

2. Consultations with stakeholders • The NCR has met and discussed the Credit Amnesty Project, including the proposed data removal, affordability guidelines, and additional measures with: • The Banking Association of South Africa • The Credit Providers Association • The Micro Finance South Africa • The Consumer Goods Council • The National Clothing Retail Federation • The Credit Bureaux Association • The Registrar of Banks • The NEDLAC

3. NCR Report Commissioned The NCR commissioned Stephen Logan an independent consumer credit consultant to investigate and report on: • the proposed data removal exercise; • possible affordability assessment guidelines; • credit literacy initiatives; and • additional measures to assist consumers. The report is nearly complete but has not been finalised. The following key findings have been made: • there is significant support for appropriate affordability assessment guidelines; • there is significant support for appropriate credit literacy programmes;

4. Key findings of consultant's report The following key findings have been made: • there is significant opposition from credit providers and credit bureaux to the removal of any credit information; • nevertheless, it is submitted that it is possible to significantly improve the credit records of credit impaired individuals; • it is possible to achieve a marginal increase in credit acceptance rates through a limited data removal exercise; • any data removal exercise should only take place after affordability assessment guidelines have been implemented and evaluated;

5. Key findings continued • consumers lack sufficient understanding of the risks and obligations of entering into credit agreements and far greater effort must be made to enhance credit literacy; • any data removal exercise must be accompanied by significant education, particularly to explain that: • any data removal exercise does not amount to writing off the payment obligation; • a clear credit record is only one consideration in applying for credit; • consumers should exercise caution when applying for and using credit.

6. NCR Impact Assessment The NCR appointed Matlotlo Group (Pty) Ltd an independent firm of actuaries and analysts to conduct an impact assessment of the likely impact of various data removal scenarios, incl: • number of consumers' impacted; • degree to which consumers' impacted; • credit acceptances; • risk to credit providers' portfolios The impact assessment is complete and key findings include: • The removal of judgment information would not significantly benefit credit impaired consumers; • The removal of dormant information would not significantly benefit credit impaired consumers

7. NCR Impact Assessment Findings cont. • The removal of adverse information under R10,000 would assist some credit impaired consumers to obtain micro loans; • The removal of adverse information under R10,000 would benefit 86% of people earning less than R15,000 • The portfolio risks of credit providers would not be adversely affected by a data removal exercise focussed on adverse information under R10,000.

8. Amendments to National Credit Act As part of a larger exercise, the Department of Trade and Industry is busy assessing what changes need to be made to the National Credit Act. Key aspects, in regards credit impairment, receiving consideration include: • the automatic removal of paid up judgments; • the automatic removal of paid up defaults; • the introduction of adverse listing rules; • criminalising the collection and listing of prescribed debts; • limiting access to credit records by employment agencies

9. Way forward Once the consultants report has been finalised the NCR and dti will discuss the recommendations made, consult further with stakeholders and determine how best to proceed.