Good debt, bad debt. ~ Shutterstock
Cape Town - It seems a near certainty that the government
will introduce a second credit amnesty. In its recent presentation to parliament,
the department of trade and industry made it clear that they were determined to
proceed with the scheme.
However, there are many in the financial sector who
expressed great concern over the consequences of such a credit amnesty.
Mark Seymour, chairperson of the Credit Providers
Association, warned that removing blacklisted creditors from databases would
make credit providers more cautious when lending money, particularly to lower
Without complete credit records, credit providers would find
it difficult to assess credit worthiness. He also said that the increased risk
might also be passed on to other consumers in the form of more expensive
An unexpected consequence of the amnesty may be that
consumers with clean credit records may then be charged higher interest rates.
Debt Rescue CEO Neil Roets said that although the envisaged
amnesty may remove millions of blacklisted people from credit bureau databases
– it will in real terms have a negative impact because it will encourage
already over-indebted consumers, to borrow more.
He added that there is a lack of understanding among most
consumers that the debt resulting from a credit agreement has to be paid.
“Because there had been inadequate information made available
to the poor and semi-literate consumers with the previous credit amnesty, many
people thought that their debt had simply been wiped clean.
“Even those who realised that this was not the case used the
opportunity to get into more debt, because they were no longer blacklisted.”
Proper education to consumers will be needed with this
credit amnesty. According to the
National Credit Regulator, the purpose of the amnesty would be to provide new
credit opportunities, reduce the cost of credit repair and help consumers pay
less for credit.
The amnesty is a foregone conclusion, but how it is to be
implemented is still being considered.
Trevor Bailey ,
chairperson of the regulators board, told parliament in February that research
had shown that a credit amnesty would benefit 86% of those with debt less than
R10 000 but earning up to R15 000 a month.
The department of trade and industry and the National Credit
Regulator are expected to submit a report to parliament’s trade and industry
portfolio committee next month on how best to implement the amnesty. This
report will form part of public hearings.
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