Effective as of 1 April 2014, all credit bureau will automatically have to remove any negative information on the credit records of consumers.
This comes after the Minister of Trade and Industry, Rob Davies, released the regulations for the Removal of Adverse Consumer Credit Information last month.
The regulations form part of the National Credit Amendment Bill (NCAB), which aims to address shortcomings in the National Credit Act (NCA), which regulates the credit industry.
Currently, half of the 21 million consumer records are impaired and, as a result, these consumers cannot access credit and employment.
According to Nomsa Motshegare, CEO at the National Credit Regulator (NCR), the bill is likely to be signed into law within the next month or two. This means that consumers will have negative information wiped off their profiles in the period between 1 April 2014 and when the bill becomes law, which is anticipated to be in May.
“But consumers with judgement relating to paid-up accounts will continue to have this information removed from their profiles on an ongoing basis,” says Motshegare.
Under the new regulations, consumers will no longer have to spend money on legal fees and go to court to have a judgement rescinded.
She stresses that the removal of adverse information on consumer profiles is not to be confused with the removal of debt. It is only the negative information that will be removed, and consumers will still be liable for the debt.
“The credit profile will still show a credit provider whether payments have been skipped when they do their risk assessments, so it is important to use this to keep your profile clean and pay your accounts. It is just the wording and symbols that will be removed,” says Motshegare.
The wording reflected on the credit profile Motshegare refers to is “delinquent, slow payer, absconded, default, not contactable, legal action and write-off” – as per the regulations. The aim is largely to allow consumers to get back into the credit market and allow those who have been unable to find employment as a result of employers checking credit history to find a job.
According to Angela Itzikowitz, director of the law firm ENSafrica and professor at Wits University, the NCA has been very effective and has protected consumers from the brunt of the financial crisis.
She believes that the NCAB is addressing most of the NCA’s shortcomings, which were mainly a result of poor drafting.
However, she says that many believe the removal of adverse information from consumer credit profiles to be a controversial piece of legislation.
“I am not sure that this will have the desired effect. I think it is going to result in credit providers being more stringent concerning lending criteria,” says Itzikowitz.
The NCAB also includes amendments to affordability assessments as well as predatory and deceptive advertising of credit to consumers.
All lenders will now have to register, and a code of conduct will be drafted for the credit industry.