The Department of Trade, Industry and Competition (DTIC) is considering prohibiting the blacklisting of indebted South Africans during the national state of disaster and expunging any blacklisting incurred during the same period.
The proposal is contained in a leaked confidential discussion document shared by the Democratic Alliance (DA) on its website on Wednesday.
DTIC argues in the document that the lockdown caused loss of income among many consumers because they could no longer work or meet their debt obligations. Their credit records therefore “deteriorated sharply.”
It adds, “One of the key interventions of Government through the DTIC is the issuance of the regulations prohibiting the adverse listing of consumers by credit and service providers and the removal of adverse consumer credit information on consumer credit records for certain defined periods.
“The regulations are aimed at assisting all consumers who are negatively affected by the national state of disaster, provided the consumers were in good standing before the national state of disaster and subsequently have had their credit records deteriorating after the commencement of the national state of disaster.”
Regulations would apply from 1 April
DTIC said it had consulted several departments as well as the Presidency on this proposal and was intending to consult the credit industry.
According to the draft regulations contained in the document, adverse consumer credit information would be removed effective from 1 April, 2020 to 30 September, 2020.
“The removal must commence 14 days from the effective date of the regulations. On application by the credit bureaux, the National Credit Regulator (NCR) is empowered to grant an extension of seven days. The regulations also provide that within this period, new listing of adverse consumer credit information is prohibited,” the document states.
The draft regulations however make clear that although blacklisting incurred during the defined period would be expunged, “the consumer is still liable to make payment and fulfil all other obligations under the credit agreement.”
DA slams proposal
DA MP Dean Macpherson slammed DTIC’s proposal in a statement on Wednesday, saying it would have “devastating consequences for the credit industry as well as consumers.”
He added, “While the idea behind this move may seem altruistic and noble, the truth is, [DTIC] Minister Ebrahim Patel is attempting to use populist rhetoric to clean up his battered public image and win over support within the ANC.
“The bottom line is that these regulations will further drive up the cost of credit for low income consumers, as credit providers will simply be unwilling to lend money to people who need it if they have no mechanism to ensure that consumers who are unable to pay, will be able continue to lend money without recourse.”
The party said it would request a Parliamentary meeting with Patel so he can “explain his actions.” However, DTIC told Business Day that Patel was waiting for the consultation process to be completed before making a final decision.