Credit amnesty: What it means ?
The Department of Trade and Industry last week published the Removal of Adverse Consumer Information and Information Relating to Paid Up Judgments Regulations, 2014 (‘the credit information amnesty’) which will come into effect on 1st April 2014.
As per the credit information amnesty, credit bureaus are required to remove the following information from their records:
- All adverse credit information of consumer behaviour such as “delinquent”, “default,” and “slowing paying information.”
- All adverse credit information of enforcement action taken by the credit provider such as “handed over to collections” or “write-off.”
- All adverse credit information contained within the payment profile of a consumer.
- All paid up judgments where the consumer has settled the capital amount.
The effective date of the credit information amnesty is 1 April 2014 and registered credit bureaus are required to remove the identified data within 2 months of the effective date.
Consumers are reminded that they are still liable for their debt under the credit information amnesty. The credit information amnesty requires the removal of adverse information from the credit bureau records and does not mean that the consumer is no longer liable for the debt.
Under the credit information amnesty, all paid up judgements are required to be removed from the credit bureau records on an on-going basis which will give consumers an incentive to pay off their debts. Currently, judgements are removed after five years, or earlier if rescinded by a court. The consumer will no longer need to go through a court process.
Consumers should check their credit records with the credit bureaus after 1st April to determine if they qualify. All consumers are encouraged to take advantage of the free annual service provided by the credit bureaus as prescribed by the National Credit Act, which entitles them to one free credit report once a year at no cost.
Widespread credit amnesty confusion
According to the credit bureau TransUnion its call centre has received an inordinate number of calls from confused South African consumers since the implementation of the amnesty.
Tersia van Rooyen, TransUnion’s manager responsible for consumer education, the call centre is fielding thousands of calls every day, with most callers confused about the terms of the amnesty.
Among the most frequently asked questions are how do I apply for amnesty, why debts incurred before April 1 are still reflected on credit reports and why credit reports still reflect “negative information”.
TransUnion provided some clarification:
It is not necessary to apply for amnesty. The terms of the credit amnesty will be applied automatically to anyone who has negative information or a paid-up judgment reflected on their credit reports prior to April 1 2014.
- The credit amnesty does not remove a consumer’s obligation to repay a debt incurred prior to April 1 2014.
- All the amnesty has done is to remove the negative information that was reflected on consumers’ credit reports before April 1 2014.
- In terms of the credit amnesty, consumers still have to repay all their debts.
The only negative information to be removed from consumers’ credit records includes negative classifications of consumer behaviour (including “delinquent”, “slow paying”, “absconded”, or “not contactable”) and negative classifications of enforcement actions (including “handed over for collection or recovery”, “repossessed”, “revoked”, any “legal action”, or “write off” of the debt).
However, any negative classifications of consumer behaviour or enforcement actions that occurred after April 1 2014, will still reflect on a consumer’s credit report in the future.
In addition, consumers’ credit reports will continue to reflect all payment behaviour – that is your monthly repayments of any debt – that took place before 1 April, 2014.
- There’s another aspect to the credit amnesty consumers should be aware of, said TransUnion.
- The credit amnesty also affects the way in which information about judgments is handled by credit bureaus.
- From June 1 2014 paid up judgments will be automatically removed from credit bureaus’ records.
- In the past, this judgment information would remain on a consumer’s credit report for five years, even if the debt had been paid.
- Previously a consumer would have had to obtain a court order to have this information removed from their credit report.
- From June 1 2014, the judgment will be removed once it has been paid.
- Every consumer has a right to their Free Credit Report once every 12 months from each of the credit bureaus
Something to remember before buying a car. Need you to have you credit record cleared, a poor credit record very often means no financing for you and the new vehicle you want to buy, so make sure you know your status.