DCI says credit amnesty won’t work
By Freestate On 15 Jul, 2013 At 02:18 PM | Categorized As Business | With 2 Comments

Martin Makoni
Bloemfontein

APROPOSED credit amnesty that could see the records of millions of bad debtors wiped off data bases of credit bureaus could see more South Africans sinking deeper into debt, according to the Debt Counselling Industry (DCI), an association of private debt counsellors.

Association founder Deborah Solomon said credit providers – unaware of the poor repayment history of bad debtors because it has been deleted – would continue giving out loans and other credit to such debtors to leave them in a worse debt crisis than they started off with.
The proposed amnesty that Trade and Industry Minister Rob Davies has tabled in cabinet for its consideration only proposes credit bureaus removing information on bad debtors from their records but such debtors would still be required to pay back what they owe.
“As the DCI we don’t think that (the credit amnesty) is the best way to tackle the debt situation in the country,” Solomon told the Free State Times by phone from her Cape Town base.
She added: “Debt counsellors will be limited in their ability to establish the debt levels of consumers while credit providers will be exposed to more risk as they won’t be able to adequately screen their clients.”
Under the proposed amnesty that may be effected as early as October this year, Davies has suggested erasing the records of bad debtors owing smaller amounts of R10 000 or less.
He has also suggested deleting the history of judgments against bad debtors once the judgement debt is paid in full.
A third proposal submitted by Davies is for credit bureaus to be asked to wipe off the records of all bad debtors regardless of the amount owed.

Solomon said her organisation believed that rather than simply erasing the records of bad debtors and forgetting about it all what was needed to resolve the debt situation in the country was an extensive drive to educate consumers on debt and financial management in general.
“There has been little to no financial training here in South Africa which is exactly why we are sitting in our current situation,” she said.
Information submitted to the national credit regulator (NCR) by registered credit providers indicates that more than nine million South Africans have impaired debts.
An impaired or distressed debt is one which the borrower is unlikely to be able to repay in full to the lender on the agreed date as the borrower is facing financial difficulty or is in some form of insolvency.
The NCR chief executive officer Nomsa Motshegare said credit providers advanced loans and other credit worth R102.29 billion in the first quarter of this year.

The figure is R17.65 billion less than the R119.94 billion advanced in credit in the last quarter of 2012. Although there has been a steady decline in credit issued, analysts still consider the levels high given the high rate of default.

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