Posts in category: Newsletter Articles

The newly formed case management department has settled down and things are running smoothly. There has been a slight increase in the total number of disputes received by the office in 2014, having opened a total of 5890 disputes. This has resulted in an increase of 0.2% when compared to 2013. The number of disputes closed also increased, totalling 6871 disputes closed, an increase of 4.1%, when compared to the previous year.

We are particularly proud to report that we saved consumers a total of R2.88 million for the year. This amount is calculated from the refunds and balance corrections in matters which we were able to resolve amicably with the credit provider members involved.

The average number of days taken to resolve a dispute in 2014 has decreased by 5.36% compared to the previous year, and now stands at 48 days, which is a positive indication of efficient turnaround times in resolving disputes. However, some matters still continue for far too long before they are resolved and we have to remind our members that adherence to turnaround times benefit all of us, but mostly their consumers. Even if the matters are resolved, some consumers comment that it took too long for our office to facilitate the resolution, and this diminishes what could have been a much more positive experience.

Insofar as trends are concerned, we continue to receive a large number of disputes relating to ‘unlawful’ emoluments attachment orders commonly known to consumers as ‘garnishee orders’. Typical complaints are that the deductions continue despite the fact that they feel the debt has been paid in full. We often find that consumers do not understand the dynamics of how these orders operate, nor the added costs and legal fees that keep increasing the outstanding balance. Another trend is still the frequent complaints about statements of account, and disputes and discrepancies over the amounts due. Queries relating to the calculation of interest and legal fees also keep us busy.

We have seen an increase in the number of complaints where reckless credit becomes one of the issues to investigate. Fortunately, we have received good cooperation from almost all our members and in some instances they have agreed that the original loan, often granted years ago, was not done in accordance with the requirements or spirit of the NCA. As a result, a few consumers have had their loans recalculated or interests etc, written off.

As mentioned in our previous newsletters, we anticipate receiving an influx of disputes relating to prescription, and possible also more complaints relating to reckless credit. We eagerly await the implementation of the National Credit Amendment Act and the new regulations.

We are already in the swing of things with our consumer education efforts going ahead full steam. The first few weeks of this year were mostly spent carving the path for this year and we have a jam packed March with many Double Impact (DI) sessions planned for the month. The fact that March is Consumer Month in South Africa, makes it even more apt that we will be having an added drive in engaging consumers during this time.

International Consumer Day will be celebrated on 15 March, with the theme being focusing on consumers’ rights to healthy food.

Our consumer outreach activities for 2014 largely focussed on the credit provider tailored training, Double Impact. A total of 63 sessions were conducted throughout the year and we received rave feedback from credit provider staff and management alike on the difference it made to those who had attended the training.

We still continue to engage with consumers at their places of employment and other gatherings through our workshops. Last year, a total of 34 outreach activities were conducted in partnership with various stakeholders and ordinary community members.

Our efforts in the media still remain a very important aspect when it comes to reaching out to consumers. Last year our Advertising Value Equivalent (AVE) amounted to R32 million! This is by far the highest AVE value recorded in the history of the Credit Ombud’s office. We participated in 198 radio and television interviews, featured in 159 magazine and newspaper articles and in 115 online articles.

The combined effect of our outreach and consumer education activities, coupled with our media activities, went a long way in assisting consumers and highlighting the work our office has done in the past 10 years. We will certainly continue to use these mediums to make a lasting difference in the lives of South African consumers in the coming 10 years.

Although still in its early stages, 2015 is already showing signs of being another momentous year for the credit industry. I attended the Stellenbosch University legal aid centre’s court case which looked at the practices around Emolument Attachment Orders (EOAs) during the week of 16 February, which promises to have far reaching effects on our industry where EOAs are concerned.

A lot happened in the last few weeks of February as during the same week the Ombudsmen for financial services met to review the Financial Sector Regulations Bill. Comments will be forwarded to Treasury on 2 March 2015 and a meeting will be held with Treasury on 10 March to discuss the various clauses that possible could affect the way that Ombuds operate in this country.

25 February was yet another day which was significant for our industry and our office particularly. We had the Budget speech which will surely affect the lives of those consumers who are under financial pressure with the Minister announcing an increase in fuel levy and personal tax. These increases will certainly affect all South African’s as consumers will now need to spend more money on daily transport not only to get themselves to work, but to also ensure that their children get to school every day.

We also celebrated our 10 year anniversary on 25 February, launched our Annual Report (check out the Expert Opinion section to view a copy) and officially welcomed Nicky Lala-Mohan as the Credit Ombud. Nicky officially joined the office on 1 February 2015 and we used the month of February as a handover/transitional phase.
25 February also marked my official exit from the office of the Credit Ombud. I would like to take this opportunity to thank everyone who has had a hand in assisting to build this office to what it is today. We started off as a 2 man office to having a staff contingent of 22 in 2015. There are too many people to single out and thank and I would rather not risk forgetting to mention anyone!

Closer to home, I would like to thank the Credit Ombud Council members who have assisted in steering this office to great heights. Every single one of the Credit Ombud staff have contributed in their own way to making this office one of the best ombud’s offices in South Africa. Thank you to all of you for your hard work and efforts and I wish you all of the best as you continue on this wonderful journey of assisting distressed consumers, making a difference in the lives of ordinary South Africans.

In Setswana they say di sa kopaneng ke di thaba (only mountains never cross paths). Somewhere our paths shall cross, until then farewell!

Best wishes,
Manie van Schalkwyk

The second quarter passed by as quickly as it came around! Our office has been hard at work in the past few months, especially during the month of April, dealing with a total increase of about 61% in complaints and enquiries lodged with this office when compared to the same period in 2013. The call centre also dealt with just over 9 000 calls, an increase of about 49% when compared to the same period last year.

These huge increases can mostly be attributed to the fact that we received a high volume of calls and enquiries as a result of the kick-off of the much anticipated Removal of Adverse Consumer Credit Information (RACCI) project on 1 April 2014. We were inundated with calls from consumers requesting their credit reports, as well as wanting to know if they qualify in order to benefit from RACCI. The Credit Information Department also experienced a surge in the number of complaints and queries from consumers relating to information on their payment profile lines. This goes hand in hand with the fact that consumers had the misconception that all of their negative information would be removed as a result of RACCI. Our office will continue with educating consumers on credit profiles in order to bring an understanding on such matters.

The credit landscape has been filled with the publishing of many new laws, regulations and requirements over the last few months which will come into effect in the very near future. The National Credit Amendment Act was signed into law by the president on 20 May 2014 and we anticipate its promulgation in the coming weeks. Some of the highlights in the act are those of issues relating to the early removal of credit information where paid up defaults are concerned, affordability assessment regulations, as well as the banning of collection or selling of prescribed debts. Once this act comes into effect it will definitely change the manner in which the credit industry grants and collects debt.

Our office has also had to gear itself up for the effect the changes in legislation will have on our operation. One of the requirements of the National Credit Amendment Act is that all Alternative Dispute Resolution Agents need to apply for registration and accreditation with the National Credit Regulator. We will apply once the act comes into effect and the processes around the requirements for registration are published.

These legislative changes have had the compliance arm of our organisation hard at work in order to ensure that our office will factor these requirements into our business processes going forward.

As part of streamlining our operation, various council sub-committees, established by the Credit Ombud Council, all held their first meetings to decide and agree on a work plan for the year for each sub-committee. These committees gave feedback on their plans at our last board meeting held in June 2014. These sub-committees include the Executive Committee; Human Resources and Remuneration Committee; Corporate Governance Committee and the Finance, Audit and Risk Committee.

Our office has also for the first time in its history introduced a Consumer Satisfaction Survey which aims to firstly rate our service to consumers and secondly ascertain if consumers are willing to refer others to make use of the services of the Credit Ombud. The results of the first survey were indeed pleasing with our office achieving a customer satisfaction level of 76.2% and a referral rate of 84%. This is one of the ways in which we are committed to ensuring that we offer excellent service levels to all our stakeholders.

We have recently finalised our Annual Report for the 2013 financial year and this will be made available on our website and emailed to you our valued stakeholders in the very near future.

Our office was bestowed the honour of being awarded the ADRA Clive Morkel Award of Excellence. This award is presented to a company or individual who has made a considerable contribution to the debt collection industry or ADRA in the previous year and I was humbled to receive this award, which I dedicate to everyone in our office as it is through their hard work and efforts that we were able to make an impact in the debt collection industry.

This recognition is encouraging and shows that the work we do within the credit industry goes a long way.

Our consumer education efforts have been gaining momentum as the year continues and the Double Impact training which we offer free of charge to our members has been very well received. We urge all our members to make use of the value-added service to simultaneously enhance their operations and empower their employees.

Our media activities achieved record figures this quarter, with our Advertising Value Equivalent already peaking at R17 million year-to-date. Our Public Relations arm has been highly involved in educating and informing the public, especially with regards to RACCI during the past few months.

We once again took part in the Take a Girl Child to Work Day programme on 29 May and had the pleasure of hosting 10 dynamic girls from Sekolo Sa Borogo which is based in Randburg. The value which comes from being a part of shaping the lives of our youth is immeasurable and we enjoyed introducing these young ladies to the credit industry as we ushered in Youth Month in June.

We have many projects lined up for the coming quarter and will no doubt be hard at work over the coming months in order to ensure that we continue to deliver value to all our stakeholders.

Best wishes,
Manie van Schalkwyk
Ombudsman

The past quarter has seen disputes opened in the Credit Information Department increase by 18.46% when compared to the previous quarter, while the number of disputes closed also showed an increase of 53.61% for this period. Year to date, we have opened 1 325 disputes which represents a decrease of 7.5% compared to the same period for 2013. We closed a total of 1 518 disputes for the year to date which is a decrease of 13.9% when compared to the same period last year.

One of the major trends during this quarter was that 19% of all disputes closed fell within the category of removal of negative information due to the new regulation on the ‘Removal of Adverse Consumer Credit’. These removals included all default information – paid or unpaid, as well as paid-up judgments. A number of consumers lodged disputes with our office to obtain the benefit of the new regulations, and in other cases the new regulation had an impact on existing complaints that we were working on.

Going forward, the process involving the removal of paid-up judgment information will change. Credit providers will now have the duty to inform a credit bureau within 7 days of a judgment being paid up and the bureaus will have 7 days to remove the judgment information from the consumer’s profile.

The National Credit Amendment Act will also in due course affect the processes in our office once it is promulgated. Some of the changes relate to the removal of default information once the debt has been paid-up.

Our department again received an increased number of disputes in this last quarter, having opened a total of 1228 disputes. This resulted in an increase of about 20% when compared to the same period in 2013. The number of disputes closed also increased by 10%, representing 2 370 disputes closed when compared to the same period in the previous year.

We have thus far saved consumers a total of R1.99 million, a decrease of about 18% when compared to the same period in 2013.

The issues that stood out in the past quarter confirmed the trends that we have seen and highlighted in the past months. The ever increasing number of disputes about ‘unlawful’ emoluments attachment orders resulted in consumers approaching our offices on a daily basis with varied complaints relating to ‘garnishee orders’. These include complaints regarding the amounts they have to pay in terms of these orders, the fact that they deny ever signing the consent to judgment documentation, or the fact that they feel that the outstanding loan amount should have been paid off a long time ago.

We also still continue to receive a large number of disputes about inaccurate statements of account, a topic which we have addressed in previous newsletters.

We have seen a slight increase in the number of disputes regarding prescribed debts and we expect this figure to increase substantially once the National Credit Amendment Act comes into force, as it touches on prescribed debt amongst other issues. We also expect a lot of publicity around this issue of the collection of prescribed debts, which will raise the consumer’s awareness about this topic once the Act is promulgated.

The past quarter was very busy and we are proud to report that we have conducted 29 Double Impact (DI) training sessions for 462 delegates in 7 different organisations. Our team really pulled out all the stops in order to accommodate the various organisations’ needs, at times conducting 4 sessions in one day!

Bookings for the DI training continue to stream in and we encourage those members who have not already done so to contact our office in order to benefit from this free training which the employees perceive as very valuable and even life-changing in some instances.

We were approached by PikiTup to assist them with their financial wellness programme for their employees. We agreed to partner with them and in the process we reached hundreds of consumers through this programme. We also involved the National Credit Regulator and other stakeholders, making for very effective sessions. The rollout of the programme is continuing and by the end of this programme, we would have covered all their employees based at all their various depots.

Our ongoing consumer education efforts also included 6 consumer awareness workshops which were conducted across Gauteng.

Our efforts in the media resulted in an Advertising Value Equivalent of R 5.4 million for this past quarter. As we head towards the year end season, our education efforts will be focussed on encouraging responsible spending and the importance of fully understanding your obligations when taking on new credit agreements.

Member organisations who are interested in receiving a personalised presentation on the aims and benefits of Double Impact training can contact me via email on nloeto@creditombud.org.za or on 011 781 6431 in order to set up appointments.

(All opinions expressed in the Expert Opinion section are those of the writer and do not necessarily reflect the opinion of the Credit Ombud.)

The impact of the removal of consumer credit information and the current regulatory changes on the credit bureaus

On 1 April 2014 the removal of adverse credit information as well as the removal of information relating to paid up judgments became effective. This meant that all credit bureaus were required to remove all adverse information related to consumer behaviour (delinquent, default, etc.), all adverse information related to enforcement action (handed over, written off, etc.) as well as all paid up judgments where the capital amount had been settled by the consumer. The consumer’s payment profile also had to be updated accordingly.

According to a presentation made to parliament, the primary goals of this consumer credit information removal were to: reduce credit impairment by addressing its causes; remove barriers to credit by assisting consumers who could afford less credit; assist consumers impacted by economic recession; reduce overpricing and barriers to employment; and embark on restorative justice by redressing the failure of credit providers to consider broader economic impacts.

In practical terms the government intended to secure the re-entry of millions of consumers back into the credit market by removing ‘blacklisted’ consumers who had paid their debts but who were still prevented access to credit, housing and employment (Government Source). According to the dti it would also compel credit providers to conduct proper affordability assessments. Research conducted by a leading credit research company indicated that as many of 40% of all consumers believed that their debt obligations would be removed by 1 April (ScoreSharp). This is supported by feedback from the credit bureaus that experienced large volumes of consumers phoning into their contact centres expecting their debt to have being ‘paid off’ by government and their obligations to have been cleared. Although consumers generally seemed to be more informed, the impact was less understood than with the previous amnesty. Overall the numbers of calls to the various credit bureaus have increased exponentially as consumers still continue to request their credit reports and verify that their information was removed. This is a positive indication, as consumers seem to be taking a greater interest in their own credit profile.

Numbers presented by ScoreSharp show that approximately 4,1 million consumers benefited from the removal and that approximately 7,5 million consumer records were affected. They further report that the re-population rate of the data is rapid as a control sample shows that 20% of the volume of deleted data is replaced within 3 months.
Based on this, one can conclude that the intended goals were broadly achieved but it is also clear that this is certainly not the last regulatory intervention. With the National Credit Act Amendments being implemented together with numerous other regulations governing the listing and sharing of consumer credit information, credit providers and credit bureaus are all forced to relook their business processes to ensure compliance.

Going forward the Credit Bureau Association, together with the respective credit bureaus, will continue to focus on data quality through initiatives such as Project Evolution, which is a joint industry initiative that will bring CPA and NLR data together and provide a dynamic reporting environment with the introduction of a 48-hour update process by credit providers to credit bureaus. This will include information related to new loans or credit facilities granted as well as loans and facilities paid up. It will make a significant impact on affordability assessments and will aid credit providers to ensure compliance with the latest National Credit Act amendments and draft Regulations. This is also a world first with South Africa pioneering the way. Legislative compliance will remain a key focus and the credit bureaus will continue to prioritise developments that support this.

All the changes and developments in the industry have resulted in the better part of 2014 being particularly busy and challenging for our office. With only a couple of months left in the year, we are very busy wrapping up the remainder of our plans. For my part, it will also be a momentous last few months as it signals the end of my tenure at the helm of this office. Together with my team, we have been hard at work to finish off important projects and round up affairs before the close of 2014.

In the last quarter our call centre dealt with 8 165 calls, bringing the total to 17 188 calls received year to date. This is an increase of 37% when compared to the same period last year. We opened 3 705 and closed 3 888 disputes by the end of the third quarter. This translates into an increase of 4.48% in the disputes opened and a decrease of 9% in the disputes closed when compared to the same period last year.

We have had two very important developments in our industry in the past quarter. Firstly, the National Credit Amendment Act was published on 19 May 2014 and secondly, the much anticipated publishing of the Draft National Credit Regulations on 1 August 2014 for public comment. We submitted comments on the Regulations to the Department of Trade and Industry and in our next edition we will provide more details on our submission.

The National Credit Amendment Act was signed by the President and we await the promulgation date. The amendments which are relevant to the work we do include the new section on prescribed debts, as well as the automatic removal of adverse consumer credit information once a debt has been paid up. The new requirement for all alternative dispute resolution (ADR) agents to apply for registration with the NCR is another important change which affects our office. We currently await the requirements for registration and once this has been determined, we will be in a better position to understand how this new process will impact our office. Another important amendment is that to section 134, which clarifies the role of an ADR agent, such as our office, in assisting consumers with complaints relating to reckless credit.

I would like to wish you a good and productive final quarter as we gear up towards year end. May you use the remaining 90 or so days of 2014 to achieve all you had set out to accomplish at the beginning of the year!

Best wishes,
Manie van Schalkwyk
Ombudsman

(All opinions expressed in the Expert Opinion section are those of the writer and do not necessarily reflect the opinion of the Credit Ombud.)

The incidence of undesirable practices relating to ‘garnishee orders’: a follow up report (University of Pretoria Law Clinic)

Charlotte van Sittert is a Research and Short Courses Attorney at the University of Pretoria’s Law Clinic

 “… there could be as many as 5 million garnishee orders countrywide. Earlier estimates had put the figure at 3 million.”-Business Report, 26 August 2013

Uncertainty exists regarding the true number of active emoluments attachment orders, which are commonly but erroneously referred to as garnishee orders, in South Africa as well as the percentage of the workforce in South Africa affected by these orders. The media reports on the figure of emoluments attachment orders vary between 3 and 5 million active orders (Fin 24, 6 August 2012). The accuracy of these figures cannot be established as particulars of the sample size and the sampling methodology are not recorded.

Other media reports indicate that between 10% and 15% of South Africa’s workforce has active emoluments attachment orders effective against their salaries (Moneyweb, 1 October 2012).

In 2013 the UP Law Clinic and the Deutsche Gesellschaft fur Internationale Zussamenarbeit (GIZ) entered into an agreement in terms of which further research into the incidence of “garnishee” orders and the abusive practices to which employees with emoluments attachment orders against their salaries can fall prey, was conducted.

One of the aims of the research was to estimate how many employees in the formal sector in South Africa had emolument attachment orders against their salaries. (The formal sector is affected by emoluments attachment orders because this form of debt collection can only be used when a debtor is in formal employment.

Some of the findings of this research were:

1. The private sector with the highest number of employees with garnishee orders against their salaries was the Mining sector with 12.9% of employees having orders against their salaries. This corresponds with media reports highlighting the Mining sector as one of the sectors experiencing trouble with over-indebtedness and possible exploitation. In this sector it is estimated that garnished employees have an average of 1.43 orders against their salaries.
2. On the other hand, with 1 840 276 employees employed in the Services: financial intermediation, insurance, real estate and business industry at the end of June 2013, the estimated number of garnished employees with reference to the sample, is 2.28%. The average number of orders per garnished employee is 1.76.
3. In the Manufacturing industry, employing a total 1 142 979 employees, it was estimated that 9.2% of employees have emoluments attachment orders against their salaries. An average of 1.40 orders exists for every garnished employee in this sector. These three sectors are compared below:
4. From the above comparison it is clear that when estimating the number of employees with garnishee orders, one cannot use a sample coming from one industry alone and extrapolate the figure to be representative of the whole sector as it will not be accurate .
5. The number of employees with emoluments attachment orders in the overall formal private sector proved to be lower than was speculated in the media. Based on the sectors used in Data set A 320 019 employees in the formal private sector in South Africa had emoluments attachment orders against their salaries in June 2013. If the remaining sectors identified by StatsSA for which the research team could not obtain a suitable sample, e.g Electricity, gas and water supply, and construction are included in calculations and it is accepted that a similar trend exists for these sectors, the number of employees in the private sector with emoluments attachment orders against their salaries in June 2013 would be 435 084.
6. It is estimated that in June 2013, 72 118 employees employed by National Departments in South Africa had emoluments attachment orders against their salaries. The average number of orders per garnished employee was 1.60.
7. 116 918 employees employed by Provincial Departments in South Africa in June 2013 had orders against their salaries, with an average number of 1.57 orders per garnished employee.
8. The number of employees with emoluments attachment orders against their salaries in June 2013 in the overall public sector is estimated to be 240 034. This calculation is based on an estimate of 12.2% for the public sector, obtained as a weighted estimate from the national and provincial department data. This is notably lower than the figure released by the Public Service Commission in 2007 (20%). A reason for this can be that employees and their employers are more aware of the abuses relating to emoluments attachment orders. Garnishee administrators administering the orders on behalf of employers also play a role. A further reason may be that the compilers of the Public Service Commission Report did not take into account that an employee can have more than one emoluments attachment order against his or her salary and equalled the total number of emoluments attachment orders to the total number of public servants subject to these orders. A comparison of the public and private sector is done below:
9. The total estimated number of employees with emoluments attachment orders against their salaries in the formal sector (excluding agriculture) in June 2013 was 675 118. According to the employment figures released by StatsSA for June 2013, 8 436 820 employees were employed in the formal sector in June 2013. This means that 8% of employees in the formal sector had a deduction made for either debt, maintenance or an administration order.

In the report the attachment of wages in a number of foreign jurisdictions like the United States, England and Wales, Germany and certain African countries, was investigated and compared to the South African position. It was found that, unlike South Africa, all the other countries surveyed had some form of limitation on the amount that can be deducted in terms of the emoluments attachment order and that multiple deductions are either prohibited or strictly regulated.

Irregularities and shortcomings in the emoluments attachment order process were also identified in the report. This includes:

1. Uncertainty regarding the interpretation of jurisdiction and the in duplum rule and/or Section 103(5) of the National Credit Act;
2. Lack of uniformity in the court processes followed by different Magistrates’ courts when granting orders which leads to forum shopping;
3. Shortcomings in the statutory process with no provision for affordability tests;
4. Irregular deductions affecting the repayment period, interest as well as costs charged;
5. Payroll offices stopping deductions too soon or too late with costs and interest consequences;
6. Fees being charged for statements of account whilst the Act provides for free statements of account to be delivered on reasonable request;
7. Debtors paying instalments with no prospect of settlement resulting in debtors being caught in a debt spiral with no likelihood of rehabilitation;
8. Lack of cap on amount that can be deducted resulting in employees being left without sufficient means for his own and his dependant’s maintenance;
9. Charging of excessive fees, incorrect calculation of interest and outstanding balances, and non-admissible charges being levied;
10. Granting of reckless credit and multiple deductions from employees’ salaries;
11. 5% commission payable to employer paid by employee instead of credit provider;
12. Fraud by clerks of court – currently court officials at two magistrate’s courts are under investigation for the issuing of fraudulent orders;
13. Apportionment of payments not complying with Section 126 of National Credit Act.

Recommendations for the proper administration of emoluments attachment orders in the workplace are made in the report and particulars on agencies that could assist aggrieved consumers or employers are also given. The report will be released in the public domain at the end of November 2013.