Credit consumers in South Africa have been relieved to receive favourable regulations from the Department of Trade and Industry.
Previously consumers could be listed on the credit bureau with adverse tags which deprived them from more credit allowance.
This practice will discontinue as the DTI has introduced the Removal of Adverse Consumer Information and Information Relating to Paid Up Judgements Regulations which will be effective from 1 April 2014.
“The term 'credit information amnesty' was changed to the 'removal of adverse consumer credit information and paid up judgements'. The name was changed to deliver a clear message. Debt and liabilities will not be completely wiped off,” Nomsa Motshegare, chief executive officer for National Credit Regulator (NCR) told CNBC Africa.
The DTI compiled the regulations to combat the discrepancies which were found in the National Credit Act, which is the regulator of the credit industry.
Adverse information with words such as "delinquent”, “default", “handed over to collections” or “write-off” will be removed from consumer's credit history.
(READ MORE:Credit risk costing S.Africa’s consumers)
The 2013 DTI’s annual report noted that 9.5 million consumers had impaired credit records and also 47.5 per cent of all South African credit consumers had impaired credit records.
These discrepancies were believed to be an obstacle for consumers to acquire employment or rentals for housing.
Motshegare explained that, paid up judgements and default listings will also be removed off consumer credit records automatically, on conditions that consumers provide proof of payment to the respective credit bureau.
Previously the onus would be on the consumer to acquire legal services to remove the records on credit bureau, but with the regulation in place this will no longer be necessary.
Some believe that credit providers will be more reluctant to grant credit to consumers, perceiving the new regulation to be less transparent in terms of risk assessment measurement.
(READ MORE:Credit amnesty could increase S.African consumer debt)
However, the NCR promotes credit history transparency. The information of consumers who pay badly will remain with the credit bureau once the bill has been signed with the law.
“The consumer credit profile will still remain, [therefore] the credit provider will be able to see all the information. We have introduced affordability assessment regulations, to regulate consistency from credit providers in transactions of extending credit to consumers,” said Motshegare.
BY: THANDO MATUTU