The state of the credit bureau system and regulation in South Africa

Livingstone, Zambia Mr Lesiba Mashapa

The Fifth Annual African Dialogue Conference Consumer Protection

Conference

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Size of S.A. consumer credit market

Figures as at March 2013

“There are two things a person should never be angry at, what they can help, and what they cannot.” - Plato

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State of consumer indebtedness in S.A.

A total of 20.08 million credit active consumers reported for March 2013 quarter

The % of consumers with “impaired records” increased to 47.5%

Increase in consumers falling into “3+months”and “Adverse listings” categories

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The credit bureau system in South Africa

11 credit bureaus registered, pre-registration audits focusing on capacity to manage data & deal with consumer complaints

Negative & positive data sharing by credit providers on a voluntary basis for the benefit of credit providers (credit risk assessments) and consumers (limit reckless lending & over-indebtedness)

Shorter retention periods for adverse listings & longer retention periods for judgment listings

Legal obligation on bureaus for data accuracy: (a) to assess validity of data prior to loading, (b) to remove inaccurate data from credit records, and (c) to take reasonable steps to ensure that credit reports are accurate.

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The credit bureau system in South Africa cont.

Consumer rights to (a) be notified before adverse information is reported to the bureaus, (b) annual access to free credit report, (c) dispute inaccurate information, and (d) compensation for the cost of correcting inaccurate information

Enforcement through annual compliance audits by auditors & regulatory inspections

Negative implications of listings on consumers: (a) cost of credit, (b) access to credit, (c) employment, (d) rental accommodation

Expensive for consumers to have judgment listings removed from their records as they have to be rescinded by the courts

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The 2007 credit information amnesty

‘data cleansing’ regulations implemented in 2007 as a clean-up mechanism & to offer listed consumers renewed opportunities

Certain adverse, judgment & dormant account information had to be removed from credit records

Audits on data accuracy & policies and procedures implemented by bureaus

Significant data accuracy issues identified & addressed i.e. multiple listings, incorrect data

Impact of the 2007 amnesty insignificant: (a) strict conditions i.r.o. number of judgments & monetary value of listings, (b) marginal increase in credit acceptances, and (c) no measures to address the underlying causes of credit impairments & over-indebtedness

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The 2013 proposed credit information amnesty

Proposal developed to introduce a second credit information amnesty and remove only adverse information as an amnesty

Purpose of 2013 proposed amnesty is to provide relief to listed consumers to (a) access credit if they can afford it, (b) reduce cost of credit, (c) access employment & rental accommodation, and (d) stimulate their spending & thus help grow the economy

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The 2013 proposed credit information amnesty

cont. Additional measures to be introduced with the amnesty (a) guidelines on

assessing affordability, (b) removal of adverse & judgment listings on settlement of underlying debts, (c) prohibition on the collection of prescribed debt, (d) enhanced listing procedures, (e) new rules on the use of credit reports for employment screening, (f) requirement for all credit providers to submit credit data to bureaus

Amnesty proposal had due regard to risk that amnesty may pose to portfolios of credit providers and will not remove: (a) account performance information, (b) notices & judgments (including debt reviews, liquidations, sequestrations) (c) dormant account information important for clothing retailers relying on revolving credit facilities for credit risk assessment

The debts will not be written-off The scope of the amnesty does not include audits on data accuracy and

policies & procedures implemented by the bureaus

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Thank You!

www.ncr.org.za