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Credit Amnesty - VGA Chartered Accountants Inc

Relief for Indebted Consumers
Categories: Financial
Reviewed by Media Mike - Rating: 5.0

SOME RELIEF FOR INDEBTED CONSUMERS

Article © CA(SA)DotNews by DotNews

The National Credit Act (NCA) came into effect in 2007 amidst much fanfare that this would level the playing fields and make it easier and cheaper for all consumers to borrow funds. However, this has not been the case – credit providers have been happy to advance money knowing that debt collectors have excellent collection systems. In addition, there are no laid down guidelines as to how to test people’s ability to repay debt advanced to them.

Thus, widespread abuse has crept in. Unsecured lending rose 53% in 2012 and over 9 million consumers had fallen behind on their debt repayments.  Finally, the cost of borrowing has continued to rise – as people struggle to pay debt this attracts adverse ratings by credit providers which in turn pushes up the cost of debt.

Government has decided to act The authorities have been considering ways to curb the excesses. In terms of Regulations recently gazetted, two immediate measures were announced.Firstly

They have announced a credit “amnesty” from 1 April 2014.  Note that the term “amnesty”, which has been bandied about freely by the media, is misleading in that it is only an “information” amnesty.  Debts themselves are not written off or reduced, and remain payable in full.This means that all “adverse information” (as defined) on record is to be removed from credit providers’ data bases by 1 June.  “Adverse information” includes comments on consumers’ behaviour (“delinquent”, “slow payer” etc), actions taken by credit bureaus (“handed over”, “written off”), information on disputes with credit providers and symbols or letters or numbers (such as bank codes) which have negative meanings.Credit bureaus must notify all other credit bureaus that the information has been deleted and all notified are to remove this information from their data bases. In other words as at 1 April, all “adverse information” is wiped off consumer records.
However, credit providers may keep on record any adverse information gathered after 1 April.SecondlyIn cases where a judgment has been granted on a debt and the consumer pays up all of the capital on a debt, all information relating to the judgment is to be deleted from the credit bureau’s records. The relevant bureau is to notify all other credit providers to similarly delete this information from their records.Unlike “adverse information”, in all future cases where the capital is paid off, judgment information is to be expunged from the consumer’s records. Consumers are thus encouraged to pay off their debts.

In essence, these measures give indebted consumers breathing space as credit should become more accessible to them and future loans should attract lower interest rates and hence repayments.

What advice should I give my staff?

Many of you will have staff that have become indebted over the past few years. Tell them there is an opportunity for them to start afresh with their debt records.

 

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