“Our point of view is that this needs to be approached with a great deal of caution and the full consequences understood, because this is dangerous ground,” Lees says.
During a meeting in Parliament last month, hosted by the portfolio committee on trade and industry and attended by the National Credit Regulator and the Banking Association of South Africa (Basa), Cas Coovadia, the managing director of Basa, said an amnesty was incorrect in principle and “encourages an inappropriate culture”.
The previous amnesty was not a success, Coovadia said. “We can’t give out the message that says, ‘People, get into trouble and every five years we’ll call an amnesty’.”
Coovadia said Basa disagrees with the call for a credit information amnesty because:
Expunging negative credit information from the records of consumers will only enable them to get more credit, which is counter-intuitive; and
It will make lending more risky, and the banks will have to price for that risk or pull back on lending.
“We believe the impact will be fewer loans or more expensive loans,” Coovadia said.
More interaction and engagement between the regulator and credit providers would be more productive than an amnesty, he said.
Manie van Schalkwyk, the Credit Ombud (who is not a statutory ombud), says the previous amnesty had a clean-up effect and was called for, but another amnesty five years later is “dangerous”. He says: “Most of those who benefited from the previous amnesty were in default within two years.”
The call for another amnesty “doesn’t make sense. It sounds great – like the government is giving consumers another chance – but it will provide artificial relief. You may take the negative information away, but the debt remains. And without the negative information, the consumer is able to qualify for more debt,” Van Schalkwyk says.
He says the global economic meltdown was a result of credit being extended to people who couldn’t afford it. “We’re creating an environment where this could happen again.”
Paul Slot, president of the Debt Counsellors Association of South Africa, says wiping consumers’ records clean doesn’t resolve the problem of over-indebtedness. “It will just make the problem worse for those consumers who qualify for the amnesty. People have the
impression that their debts get expunged, but it’s only the negative information that gets expunged,” Slot says.
Michael Lawrence, the executive director of the National Clothing Retail Federation (NCRF), says the only people who will score from a credit information amnesty are irresponsible borrowers and irresponsible lenders, “because in the absence of good information they can justify irresponsible lending”.
Lawrence says the NCRF supports the comments made by Basa, “and if there are problems with the recording of the data, then they should be ironed out, which is why the NCRF has committed to participating in work groups [to resolve this issue]”.