By Angelique Ruzicka, editor, Justmoney.co.za
Borrowers that have paid off their loans will have any default judgements against their names with credit burrows removed without the need to have them rescinded in court announced Trade and Industry Minister, Rob Davies this week.
In an address to National Assembly, Davies said: “The NCAB (national credit amendment bill) amends sections dealing with removal of adverse consumer credit information to allow for immediate removal after payment on an ongoing basis. This means that a consumer with a judgment listed at the credit bureau need not approach the court anymore to rescind a judgment and spend money they don't have.”
Paid up borrowers will then be allowed to borrow again. “Immediately on payment, the consumer's record must be updated to remove such negative information. This will allow consumers to get back to the credit market and access credit if they can afford it.
"It will also allow listed persons to be able to get employment as prospective employers currently reject them on the basis of their negative credit listing. A decision not to grant credit should be based on whether or not a consumer can afford such credit and not on negative information recorded against the name of the consumer in the past," said Davies.
Confusion over rules
However industry experts are warning borrowers not to get confused into thinking that this credit information anmnesty applies to all loans, whether paid or unpaid.
Borrowers should also not shirk their responsibilities when it comes to paying off loans. According to Kevin Hurwitz, chief executive of Wonga, what is important in terms of this amnesty is that consumers understand that they are still required to pay off any existing debt that they hold. “Many consumers erroneously believe that this is a get-out-of-jail-free card and that the debt itself will disappear”.
Credit profiles remain
Lenders will still have access to borrowers’ credit profiles, which will include information on how many credit agreements a borrower may have outstanding and how much they are paying towards these loans. Based on this information credit providers will make a decision about whether or not to lend to consumers. Commentators believe that this may lead to lenders tightening up their lending criteria and scrutinising borrower’s credit profiles in a lot more detail.
The rules surrounding the removal of adverse credit information for paid up borrowers will come into effect from the 1 April 2014. Credit bureaux will have two months in which to update their systems from 1 April.