Credit Amnesty for those under Debt Review too?
Credit Amnesty – Will it apply to consumers under debt review?
You may have heard about the upcoming Credit information Amnesty. It has many people very excited. but is it actually that exciting? Some consumers who are under debt review are wondering if the credit amnesty will also apply to them? The simple answer is: YES but it may not mean what you think it does.
If you have not heard about it then go here to read more in this issue of Debtfree DIGI: http://debtfreedigi.co.za/read-the-current-issue-of-debtfree-digi-magazine-online/
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But what is this Credit Amnesty? Does it mean your old debts will be written off?
The answer sadly is NO.
The amnesty has to do with what information is shown on Credit Bureau reports and not what debt is actually owed. All the Credit Amnesty (actually Credit Information Amnesty) will change is how your bureau report looks. Even if some information will be removed, you will still have to pay your existing debts. If you don’t pay your credit providers will take you to court and get judgements against you. So don’t stop paying your debts.
Here is an extract from this months Debtfree DIGI Magazine article on the subject:
WHAT DOES THE CREDIT INFORMATION AMNESTY MEAN FOR YOU?
Some love it, others hate it. People say it is just a political ploy to confuse consumers into thinking their situation has improved, others are convinced it will open the gateway for consumers to get work and accommodation. But exactly what is the credit information amnesty?
The term “amnesty” is a tricky one. As soon as most people here that word linked to anything about credit they assume they will not have to pay their debts, since they will receive “amnesty”.
The official term for the “amnesty” is, in fact, the removal of adverse consumer credit information. It has been brought about by the Minister of the DTI who recently published new regulations (for the National Credit Act). These regulations are now changing the way credit bureaus show information about consumers. It also makes credit providers take action to remove past bad listings when debts are paid up.
Will I still have to pay my debt?
Unfortunately, Yes.
Even though some information will not be present on your credit bureau report, you will still be liable for all your existing debts.
However remember that most debts that have not been collected on for over 3 years are prescribed (so you don’t have to pay them) and with the recent National Credit Amendment Bill soon to be in effect, it will become illegal for companies to try trick you into paying old uncollected debt that is prescribed.
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So what will change on my credit bureau report?
There are many different credit bureaus in SA (see the list). While they all do things slightly different, all have ways of showing when a consumer is not paying well or at all. In fact this is quickly evident if you simply look at the month to month payment history. However some reports also include some negative terms such as: slow payer, delinquent, uncontactable. The reports also show when a dispute has been lodged or a matter has been handed over to legal (or written off – which often simply means sold to a debt collection company). Some Reports have in the past also had certain symbols which are shown which indicate negative things about the account or consumer. All these things will now have to change.
Also information about past judgments which have now been paid up by the consumer will have to be removed. This will now be ongoing for all paid up judgments.
Why?
It seems the concern is that when a consumer applies for a job or accommodation and someone who knows little about finances or credit reports tries to read the consumers report and sees one of these terms they immediately decide the consumer is untrustworthy. By removing this information or making it harder to see if a consumer is and has been paying all their accounts it is hoped this will reduce the negative impact that drawing a credit bureau report can have. It is also hoped that by removing information about how in the past a consumer had many judgments which they have now paid up it will present a more accurate and positive picture. Others hope that by removing this information it will allow some who previously stood no chance of getting credit the opportunity to go apply for new debt.
Credit Bureaus, credit providers as well as many Debt Counsellors are very worried about the possible negative effects of removing this information. It will make a little more work for credit providers since they will have to now tell the credit bureaus when a judgement is paid up (ok so that is not a huge deal). It may allow credit providers to give consumers access to credit who have for many years been very irresponsible with the credit they had. They would thus be a higher risk and creditors would not know to allow for that.
Could this result in consumers getting access to credit who wont pay it back responsibly?
Well, at the moment half of all credit users are behind on payments so the reality is 50% of all consumers are bad at paying their credit. What’s the point of adding more symbols or phrases just to say that? With added guidelines on how credit providers evaluate consumers ability to repay there will be less room for granting credit to consumers who can’t or won’t pay. So it is clear that there is more of a psychological effect to the changes than anything else.
The changes will start to come into effect on the 1st of April 2014 (no joke).
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