The much anticipated Removal of Adverse Consumer Credit Information, with implementation date of 1 April, has finally arrived.  Millions of consumers across the country have eagerly awaited the day they will receive a ‘pardon’ for their credit sins and start afresh, with hopes of once again being able to access much needed credit.

‘The Regulations that has been debated over the past year or so, has finally came into force and we will now see the real effects of removing adverse information from consumers’ profiles as well as the effect on the credit industry as a whole,’ states Credit Ombud Manie van Schalkwyk.

According to the National Credit Regulator’s Credit Bureau Monitor statistics, close to half of the recorded 21 million consumers have impaired credit records.  This ranges from consumers with defaults, judgements, admin orders, as well as consumers who are three months or more in arrears with their account payments.  ‘In our experience, for a big percentage of cases, consumers were not able to meet their contractual obligations because of financial problems as a result of over indebtedness. The reasons for the over indebtedness will vary from retrenchments, divorce, or other changes in personal circumstances to reckless credit. The recent rise in cost of living as a result of increases in the price of food, petrol and e-tolls costs also had a significant effect on consumer’s ability to service their debts,’ says van Schalkwyk.

What is noteworthy and what people really need to grasp is that not all of the 9.8 million consumers with impaired records will benefit from this exercise.  ‘It is only about 28% of the 21 million credit active consumers, equating to about 5.78 million consumers,  who may qualify to benefit from the removal of adverse information,’ adds van Schalkwyk.

Taking a closer look at the 28% of consumers who stand to benefit from the removal of adverse information, 15.4% will definitely benefit as they fall squarely within the adverse listing category which accommodates defaults, while a further 12.6% may benefit because they fall within the category of consumers who have judgements and admin orders on their credit reports. ‘The Regulations also stipulate that information relating to paid-up judgments must be removed. At present, it is difficult to ascertain how many of the 12.6% relate to judgements and how many of those judgements have been paid up, in order for the consumers to qualify to have these  removed from their profiles,’ says van Schalkwyk.

In the lead up to 1 April, there have been many misconceptions regarding exactly who will benefit, what information will be removed and even when it was going to be implemented.

Below are some of the common myths regarding the Removal of Adverse Consumer Credit Information:

MYTH 1:

All negative information will be removed from my profile and I will be able to start on a clean slate.

FACT:

According to the regulation governing the Removal of Adverse Consumer Credit Information, only two categories of information qualify for removal, namely adverse listings and paid up judgements. For the purposes of these Regulations, adverse listings are classified as follows:

• Adverse classifications of consumer behaviour such as delinquent, default, slow paying, absconded and not contactable
• Adverse classifications of enforcement action taken by the credit provider such as handed over for collection or recovery, legal action or write off
• Details and results of disputes lodged by consumers, irrespective of the outcome of such disputes
• Adverse consumer credit information contained in the payment profile represented by means of any mark, symbol, sign or in any manner or form

The adverse information reflected on consumer’s profiles as at 1 April 2014 will be removed – irrespective of whether it was paid or not.

When it comes to Judgment information – the Regulation stipulates that the capital amount owed in terms of the judgement must be paid. Paid up judgements include civil court judgement debts, including default judgements where the consumer has settled the capital amount under the judgements.

In addition to the above, consumers must note that information pertaining to the payment profile line will not be wiped away as part of the clean up exercise. The payment profile is a recording of a consumer’s payment pattern and is recorded on a monthly basis. ‘If one is in arrears for a period of five months, as an example, that information will remain on the payment profile and credit providers can still use this information to determine whether or not to grant credit,’ says van Schalkwyk.

MYTH 2:

All judgement information will be removed from a consumer’s records

FACT

Only paid up judgements which were taken between 2009 and 2014 (before 1 April) will be removed as part of the Removal of Adverse Consumer Credit Information exercise. Older judgments should have been removed already due to the maximum retention period of 5 years.

MYTH 3:

A credit provider cannot pursue me for the debt once the default has been removed

FACT

Even if the default information is removed from a consumers’ credit profile, they are still legally obligated to pay the debt.  If this is not done, they may open themselves up for legal action by the credit provider or being handed over to debt collectors. The removal of the information does not affect the creditor’s rights in any way.

MYTH 4:

Bureaus only have 7 days after 1 April 2014 to remove information relating to paid up judgements and defaults from a consumer’s profile

FACT

Consumers need to understand that due to the enormity of this exercise it would be impossible to remove all the information overnight and that this is a process that may take time.  The Credit Bureaus have until 1 June 2014 to remove all qualifying information and it is only after this period that consumers will be able to lodge complaints if they find that the information has not been removed as it should have.

MYTH 5:

Consumers are required to follow a process before they can benefit from the ‘amnesty’

FACT

There is no process that consumers need to follow. There will be an automatic removal of all information pertaining to defaults and paid up judgements before 1 June 2014.  However, consumer are urged to access their credit records after this period and to check if defaults and paid up judgements have in fact been removed.

Other facts worth noting include:

• Information pertaining to all defaults cannot be displayed as of 1 April 2014
• Once defaults have been removed a credit provider or any other collecting agency may not re-list information pertaining to that default
• In the event that consumers have not paid up their judgements, the normal retention periods will apply
• Adverse information may be listed again on consumer’ profiles, relating to new defaults on other accounts

The second leg of the removal of adverse information will come into operation once the National Credit Amendment Bill is promulgated in the near future. ‘Once the bill is promulgated, consumers will on an ongoing basis have all paid up defaults and paid up judgements removed as soon as the credit providers provide the credit bureaus with proof of payment.  “This will of course encourage consumers to pay their debts in order for the information to be removed from their profiles” adds van Schalkwyk

Consumers can contact the office of the Credit Ombud for free assistance should they find themselves being re-listed after the Removal of Adverse Consumer Credit Information roll out or if they find that information that was supposed to be removed has not been removed by the cut off date. The office can be contacted on 0861 66 28 37 or visit their website on www.creditombud.org.za.