DebtSafe weigh in on possible credit amnesty for public servants
Debt Counselling firm DebtSafe are concerned about the possible credit amnesty for public servants
The NCR has recently investigated the possible enforcement of a Credit Amnesty as the establishment found that most public servants are indebted by an amount less than R 10 000. The implementation of such an amnesty in South Africa would mean that the consumer will potentially have more access to credit, a point which Hein du Plessis, Managing Director of DebtSafe, a leading South African debt counseling company, disagrees with. According to Du Plessis the purposes and goals of such a Credit Amnesty need to be investigated.
The 3 main stated purposes of the reprieve would be to:
1. Assist consumers with employment as employers regularly request credit enquiries
2. Enable consumers with impaired records to rent accommodation
3. Consumers will be able to have more access to debt
Further to the points above, Du Plessis delves deeper into each element:
Employment
There are specific reasons why certain designations with a company require a person with a perfect credit record. Chances are that the potential employee will be responsible for other people’s money. A consumer for instance would not trust their Financial Advisor with their affairs if they had to find out that the Advisor is not able to manage their own finances effectively. “Of course there are exceptions, but is it really the solution to just wipe out the financial history of that specific person? Does it not affect the consumer negatively if they cannot be sure that their financial matters are not being given the attention they deserve,” Du Plessis explains. Du Plessis adds that other means should be explored in order to address employment issues apart from taking away the consequences of financial problems.
Accommodation
If property owners and landlords are entrusting their very valuable properties to strangers, should they not be entitled to know what the payment history is of the tenant? The option of clearing the impaired credit record of the consumer leaves the landlord/ property investor in the vulnerable position where he/she cannot manage risk. Again, another, more sustainable solution should be found. Du Plessis further elaborates: “Any person who has paid their debt is in a position to negotiate with a landlord in this regard. Many property companies are willing to make concessions in this regard, but will be very strict with regards to the tenant adhering firmly to the terms of the lease agreement, and rightly so. If a person does have an impaired record and the landlord lets their property to that person, they will not easily provide any extension because of the potential risk involved.” The proposed tenant’s past behavior clearly indicates a potential problem and any property owner is entitled to be aware of this issue and to manage it accordingly.
Additional Credit
Current credit levels in South Africa are extremely high and statistics indicate that consumers are moving into the red zone in terms of debt. Further encouragement to incur more debt should not be entertained. According the DebtSafe findings, over 75% of the credit active consumer’s gross income is currently committed to paying debt; more than 10 million consumers have an impaired record. “Surely this indicates that we have a problem with personal management of debt in South Africa?” asks Du Plessis. He further states that it is not a solution to take away the consequences of bad management of debt repayments and not to mention what the consequences will be to the credit provider who suddenly is exposed to lending to consumers with an impaired credit history.
Du Plessis concludes by reiterating that a credit record amnesty is not a viable option for the South African consumer. “It is a short term solution to a problem with deep routed causes.” He feels that by enforcing the Credit Amnesty, the governing authorities merely treat the symptoms, rather than discovering the cause thus softening the blow of not paying your creditors. Careful management of personal finances over a period of time, will clear a consumer’s record and will also teach the consumer to budget better and create a financially secure future.