Case Management Department

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.

Consumer Education

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.

Manie Foreword

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

Credit Information Department

Our department dealt with 2 265 disputes in 2013, an almost 19% decrease as compared to the previous year. We’ve had a 10% increase in the number of disputes closed, with a total of 3 133 cases closed in 2013. This decrease in the number of disputes dealt with in 2013 can be attributed to the fact that the majority of disputes lodged at the credit bureaus are resolved in favour of the consumers and the disputed information is removed. The result is that the consumer will not have any reason to complain. However, we are concerned that at times the information that was removed is subsequently submitted to the bureaus again by the credit providers, thereby prejudicing the consumers who are under the impression that the disputed information had been removed.

We have already started seeing a rise in the number of calls from consumers wanting to know more about the process of the Removal of Adverse Consumer Credit Information, which will take effect on 1 April 2014. We have had training sessions with our staff members in a bid to capacitate and equip them with the knowledge required to deal with consumer queries.

Some of the key points contained in the Regulations are as follows:

Paid-up Judgments

  • Credit bureaus must remove all adverse information and information relating to paid up judgements within a period of two months from 1 April 2014 (effective date), meaning that by 1 June 2014 all information pertaining to the aforementioned must be removed.
  • This means that credit providers have their work cut out for them as they have to go through their records and inform the bureaus of all the judgements for the past five years which consumers have paid up.
  • Credit providers must be aware that in future, once a consumer has settled or paid a judgement, they will have the duty of informing one of the bureaus at which the consumer is listed about the paid up status.
  • The bureaus have the responsibility – within 7 days of receiving notification from the credit provider – to remove the adverse information pertaining to that judgement.
  • Secondly, the bureaus also have the duty to inform the other 13 registered bureaus – within 3 days of removing the listing – that the information has been removed from the consumer’s profile.
  • This new process will be mandatory going forward, even after the initial 2 month implementation period has lapsed.

Adverse Consumer Credit Information

  • All adverse information on a consumer’s profile must be removed by 1 June 2014.
  • In terms of the National Credit Amendment Bill, adverse consumer credit information will be removed on an ongoing basis – but only once it has been paid up.
  • Adverse consumer credit information is defined as follows:
    • Adverse subjective classifications of consumer behaviour – e.g. “delinquent”, “ default”, “slow paying”, “ absconded” and “ not contactable”.
    • Adverse classifications of enforcement action – e.g. “handed over for collection or recovery”, “ legal action” and “write-off”.
    • Dispute indicators.
    • Adverse consumer information contained in the payment profile – e.g. codes in payment profile lines such as J, K or L.

According to the Regulations, credit providers are also not allowed to use removed information of defaults for the purposes of scoring a consumer in future credit applications and they are also not allowed to re-submit removed data to the credit bureaus.

The new Regulation should positively affect consumers who have been struggling to find employment or to rent accommodation. On the other hand, it is not necessarily desirable for credit providers to lose an important section of the consumer’s payment history. However, the retention of the payment profile information will ensure that credit providers still have enough information available to them to assess credit applications. We are of the view that, unfortunately, the organisations who are going to suffer the consequences are the SMME’s, who do not have access to the payment profile information. Stifling the business of the SMME’s will not be good news for our economy as a whole.

Our office will work closely with our stakeholders, especially in the initial phases of the implementation of the new Regulations, to assist by means of providing clarity on the process to our members and consumers alike. If you need assistance in this regard, please feel free to contact me on cmatshiakgoshi@creditombud.org.za.

Note from the Ombud

And so we come to the end of 2014, one of the busiest years we’ve had. It was also a year of change for the industry at large, mostly instituted through legislative changes such as the National Credit Amendment Act and industry changes such as the proposed affordability assessment guidelines and the African Bank saga. As a result, we have had to go through our own metamorphosis in order to be fit for business going forward.

I firstly would like to announce the appointment of Nicky Lala-Mohan as Credit Ombud designate. Nicky, who is no stranger to this office, previously held the position as our Council’s Chairperson and will assume his duties on 1 February 2015. I would like to take this opportunity to congratulate Nicky on his appointment and wish him all the best as he moves this office forward. Read our Expert Opinion section in order to get to know Nicky better.

We have had to streamline our operations in order to be in a position to provide a better service to our stakeholders. As a result, the Credit Information Department and the Non-bank Credit Department have been merged into one Case Management Department, which will be headed by Reana Steyn. This move will enable us to better utilize our in-house resources and expertise, with the added benefit of quicker turnaround times in the work we do.

Our Training Department has also been affected by the changes and we will no longer have a Training Co-ordinator going forward. The education stream of our organisation will still be operating as usual under the helm of Neo Loeto.

We have had to say goodbye to Cynthia Matshiakgotshi as a result of these changes. The hard work and dedication she gave during her time at the Credit Ombud’s office is much appreciated and we wish her well in her future endeavours.

The Council’s Governance Sub-Committee has been hard at work reviewing our organisational policies. The Human Resources, Information Technology, Communications, Finance and Dispute Management policies have been approved. This is yet another step in ensuring that our organisation is fit for business and has a sound framework in place.
I attended the International Ombudsman Conference which took place in Trinidad and Tobago in early October. From our interactions with ombudsmen from other countries, it is very evident that the work our office does is essential and we come out head and shoulders when compared to similar offices internationally.

In the last quarter, our call centre dealt with 8 489 calls, bringing the total to 25 677 calls received year to date. This is an increase of about 24% when compared to the same period last year. We opened 1 543 and closed 2 105 disputes by the end of the third quarter. This translates into slight decreases of 2.92% in the disputes opened and 3.17% in the disputes closed when compared to the previous year.

Our office will close on 24 December 2014 and reopen on 5 January 2015. I would like to take this opportunity to wish you well as you take the time to be with loved ones during the festive season.

Keep safe and enjoy the well deserved break!

Best wishes,
Manie van Schalkwyk

At a Glance – Consumer Education

The year kicked off on a busy note with the growing demand for Double Impact (DI) training sessions. We have conducted a total of 5 DI sessions already this year, with more sessions already scheduled for the coming few months. Those members who are interested in receiving a personalised presentation on the aims and benefits of the training can contact me via email on nloeto@creditombud.org.za or on 011 781 6431 in order to set up appointments.

We have interacted with Genesis Analytics, an internationally renowned economics research organisation, who have shown an interest in sampling some of the work that we have done thus far in the DI training and are looking at benchmarking some of the studies they conduct with results from our training. This definitely is a sign that we are tapping the correct buttons with the training that we offer.

Our diary is packed this March as we celebrate Consumer Rights Month in our country. We have teamed up with a few of our stakeholders in order to provide much needed information to consumers by conducting consumer education drives throughout the month.

Our partnership with the National Credit Regulator (NCR) has evolved into the education space, with our office partnering with the NCR on their ‘Know your Status’ Campaign as part of Consumer Rights Month activities. We have so far visited the Western Cape and Limpopo provinces and will visit the Northern Cape and Mpumalanga in the coming weeks, reaching out to thousands of consumers at malls and shopping centres.

We have this year also partnered with Consumer Affairs North West in a bid to educate public servants in the various districts of the province on credit and finance related matters.

We are delighted to have the opportunity to reach out to Community Development Workers through our collaboration with Black Sash in Gauteng. We hope to see this partnering move to other branch offices all over the country.

2013 was a fruitful year as we continued to spread the word about the work our office does in different communities. Our total exposure in the media for the year amounted to just over R24 million, this achieved in radio, television, online and print media. We hope to continue on this path and reach even more audiences through our media programmes.

Last year we conducted a total of 37 workshops, which were more focussed on reaching out to credit active consumers, accessing them at their places of employment. We have seen this shift in focus bear fruit and wish to continue to grow workshops in this area as well.

Our project with Consumer Affairs Gauteng to roll out our education workshops to public sector employees in the various districts within GPG started with a workshop for all the Employee Assistance Programme (EAP) Practitioners within the province on 18 February. We look forward to rolling out the workshops to the rest of the employees as the year progresses.

Note from the Ombud

The year has been off to a quick start and we have already gotten stuck into 2014. We have reason to believe that this year will be another significant year in shaping the credit industry. I am proud to announce that this year our office celebrates a momentous 10 years of assisting consumers across the South African landscape!

The office started off as a small 3-man office-run operation and has grown to a staff contingent of 22, touching the lives of thousands of consumers each year. We would like to thank our valued stakeholders for partnering with us and helping to realise our vision for this office. Our office has seen many significant moments over the past 10 years, especially the value that we bring to our members and to their customers.

The beginning of this year brought about the presentations, deliberations and finally the passing of the National Credit Amendment Bill. We have already started dealing with queries from consumers seeking clarity on the much anticipated rollout of the Removal of Adverse Credit Information Project on1 April 2014.

Our office performed well in 2013 and saw a 6.7% increase in the number of disputes opened for the year, with a total of 5 878 disputes opened. We closed a total of 7 164 disputes during last year, an increase of 39.4% as compared to the same period last year. On average it took 48 days to resolve complaints.

Calls through to the call centre also increased by almost 12% as compared to the previous year, with the call centre handling nearly 24 000 calls for the year.

We achieved an all-time record of R3.8 million in savings for consumers in 2013! This is money that was calculated using the amounts written off, as well as refunds where consumers had paid over more than the amount payable on their accounts.

Our efforts to spread the word on the work our office does produced an Advertising Value Equivalent of just over R24 million last year. One great plus for 2013 relating to our media exposure is that we have spread our footprint in broadcast media, tapping into previously untapped stations in both community and national radio stations.

Our team in the training department has been hard at work with the rollout of the Double Impact training. Many more of our credit providers have taken up the opportunity of this free training and have found much value by affording their staff members the opportunity of attending the training. The months of March and April already have bookings confirmed and we look forward to engaging our credit providers’ staff members, sharing valuable knowledge with them. More aptly so in March as we are currently celebrating Consumer Rights Month in South Africa, with World Consumer Rights Day being celebrated on 15 March 2014.

This year’s theme is ‘Consumers in the Digital Age’ and we have partnered with various stakeholders in order to commemorate consumer rights in our country.

We have partnered on a ‘Know your Status’ campaign with the National Credit Regulator and will visit 5 provinces during the course of the month on an outreach programme to encourage consumers to access their credit records.

Our office has also teamed up with Black Sash on an education campaign for Community Development Workers, as well as with the North West Provinces’ Consumer Affairs office where we will be conducting workshops in various districts to educate public sector employees in those districts.

Our outreach partnership with Mirco Finance South Africa (MFSA) still continues this year, with our office reaching out to MFSA members virtually through innovative, recorded presentations as part of the MFSA’s 2014 road show – the culmination of which will be in Midrand on 26 March.

We look forward to a fruitful year and making a marked difference, together with our partners and stakeholders, to the South African credit landscape.

Best wishes,
Manie van Schalkwyk
Ombudsman

Expert Opinion

Some thoughts on our consumer credit regulatory framework
By Lesiba Mashapa

The National Credit Act has introduced one of the most progressive consumer credit regulatory frameworks. It has established consumer protection standards that are comparable to generally accepted consumer protection principles in international law. This is supported by the positive reviews that it has received from many commentators locally and internationally.

It is generally accepted that this Act has contributed significantly to shielding South Africa from the impact of the 2008 global financial crisis. Its principles of responsible lending and borrowing are the hallmark of a sound consumer credit regulatory framework. They have established general parameters for credit risk assessment and management. What the global financial crisis has taught us is that without a properly formulated regulatory framework, financial institutions can collapse due to failures in corporate governance and risk management. The lessons of the US sub-prime mortgages are still fresh in our memory and should propel us to remain vigilant in supervising the market conduct practices of our credit providers.

Since the Act came into effect in 2007, it has become clear that we need to improve the way in which affordability assessments are conducted. While it cannot be assumed that reckless lending and borrowing are the sole causes of consumer over-indebtedness, their contribution to this problem cannot be ignored. These problems require a deep understanding of their causes and regulatory measures which address them in a holistic manner. In the end, the sustainability of our credit market should be judged by whether credit providers can recover what they lent and consumers can repay what they have borrowed.

We appreciate that other causes of consumer over-indebtedness arise from the macro-economic environment and cannot be addressed through the consumer credit regulatory framework.

It is also important that consumers who are over-indebted and eventually repay their debts are rehabilitated early for re-entry into the credit market. This calls for a new way of thinking on the credit bureau retention periods for judgements, adverse listings and debt review listings. In our current system, these listings have an impact on consumers beyond credit risk assessment. As consumers pay off their debts and demonstrate responsible debt repayment behaviour, the regulatory framework should be flexible to accommodate their early rehabilitation and participation in the credit market.

As we move forward towards achieving a sustainable credit market, the participation of the industry in refining some of the aspects of the regulatory framework is essential. The support of all our stakeholders will help us to make significant strides towards building a regulatory framework that is the envy of the world.

Till next time.

Lesiba Mashapa
Company Secretary

Consumer Education

Consumer Education
This quarter we conducted 9 Double Impact (DI) training sessions and have a full diary of training sessions for the month of June. At the same time, we conducted 7 workshops in four different provinces for the quarter.

Our efforts in the media reached record figures with an Advertising Value Equivalent of R 13.7 million achieved this quarter! This represents a substantial increase of 120% compared to the same period last year. The main contributors to the increase were the education we did around the Removal of Adverse Consumer Credit Information (RACCI) project during the month of April and the two shows of the programme In Debt, where our office contributed to the content and was featured, being aired in the month of April.
The Credit Ombud had 59 articles published in 30 different newspapers and magazines, did 56 interviews with 23 different radio or TV stations and had 21 articles displayed online on 26 different websites.

We have been hard at work educating the public on what RACCI is about; how it will work; who qualified and would benefit from the project. We also focussed a lot on dispelling many of the myths around the project as well as misunderstandings the public had around “credit amnesty”.

Education efforts on this front will continue in order to make sure that consumers fully understand how things will work regarding the project going forward, even though the initial 2 month period has passed.

Much of our efforts in the coming months will be focussed on delivering quality training to our members and educating consumers through various broadcast, online and print mediums.

Members who are interested in the 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 setup appointments.

Credit Information Department

In the past quarter our department dealt with 547 opened disputes and closed 526 disputes. Disputes opened increased by 27.8% as compared to the previous quarter, while disputes closed decreased by 10.85% when compared to the previous quarter.

The implementation of the Removal of Adverse Consumer Credit Information Project on 1 April 2014 saw our office inundated with calls from consumers requesting copies of their credit reports and wanting to know if they qualify for the so-called ‘credit amnesty’. It was all hands on deck in our department with everyone assisting our call centre to answer consumer queries and to redirect them to the credit bureaus to obtain their credit reports.

During this time, we experienced high volumes of consumer queries, which spiked again as we drew closer to 1 June 2014 – the due date for the credit bureaus to remove qualifying information from consumers’ profiles. Consumers mostly wanted to know how they were impacted by the project or how they could benefit.

The most common queries and disputes our department dealt with in the past quarter were the following:

  • Consumers had the misguided expectation that all the information in the payment profile line had to be removed from their credit reports.
  • Consumers were disputing their listed judgments alleging that they settled the judgment debt in full and as a result they requested the early removal of the listing. Although paid-up judgments had to be removed, there is a process which has to be followed and a verification that has to take place before the judgment information can be removed by the credit bureaus.

Although the initial 2 month period of the Removal of Adverse Credit Information Project has passed, consumers will still benefit on an ongoing basis where paid up judgments are concerned. Credit providers will now have the duty of informing a bureau of any paid up judgment within 7 days of the judgment debt being settled. The bureaus in turn have the duty of removing the listing within 3 days of being informed by a credit provided that the debt has been paid in full and furthermore, the bureau will also have to inform other bureaus of the removal of that listing.

The National Credit Amendment Act, which has recently been signed into law by the President, is on the horizon and will also have a huge impact on consumer credit information. An important issue addressed by the act relates to paid up defaults. All paid up defaults will in future also qualify for early removal once settled and the retention period will only apply if the default is not settled.