What Does the New Credit Amnesty Law Mean for You?

Posted on April 1, 2014

Credit Amnesty

Credit Amnesty

One 1 April 2014 the hotly debated New Credit Amnesty Law will become enforced in South Africa – this is according to the Consumer Goods Council of South Africa. The financial industry has offered fierce opposition for the law since it says that it will increase lender’s risk while at the same time increasing the cost of credit. The reasons for this range from being unable to source reliable credit information from consumers to being unable to trust inaccurate credit bureau reports. However, a watered down version is about to come into effect.

It will have implications for millions of South Africans and will change the way the financial industry will be able to vet potential credit applicants.

An overview of the bill includes directing credit providers to conduct more comprehensive affordability assessments on prospective consumers applying for credit. It will also require credit providers to use discretionary income guidelines when considering extending credit. Creditors will also need to prove that consumers have the discretionary income that they claim. This aims to help to protect borrowers against aggressive lending from financial institutions.

Why a New Credit Amnesty?

The South African government wants as many credit active consumers to have access to credit. Currently, 9.5 million South Africans have an adverse credit status. This is just shy of half of credit active South Africans. The government provided the following motivations for bringing into effect the new Credit Amnesty Law:

• Availability of credit is a key enabling mechanism for development and investment;
• A failure to make available widespread access to credit will often result in loss of opportunity to entrepreneurs as well as the wider economy;
• Inaccessible and expensive credit hinders growth; and
• Credit spurs on consumer spending, which is a key driver of economic growth, among other reasons.

Benefits to the Consumer

Through the new Credit Amnesty Law, the government wants to:

• Reduce credit impairment by addressing its causes;
• Remove the barriers to credit and assist those consumers who are able to afford credit to access it;
• Achieve the goals of the National Credit Act;
• Reduce over pricing of credit; and
• Remove barriers to employment, among others.

In the past blacklisted consumers needed to approach the courts to have their names cleared from adverse listings on credit bureaus. This legal process which involves the courts was time consuming and expensive for consumers. The law seeks to redress these difficulties and make it easier for consumers to have their adverse listings removed from credit bureaus without expensive court proceedings.

Your credit information is continuously gathered by credit bureaus from various sources that have extended you credit. These include lenders, banks, retailers, landlords and employers, among many others. At pbVerify we realise that as an active credit consumer you need to know your credit status and have a complete picture of your credit score and credit history.

The MYpbVerify premium credit report will consider all possible influences that exist on your credit rating and combine it into a single and easy to read credit check report. You will be able to form a complete picture of your credit status and history in the market and see what prospective lenders see when they consider your credit application. Contact pbVerify to learn more about many value-adding services.