Publications
Partners
A Fin24 user wants to know how and where to apply for debt amnesty. She writes:
I read an article in the Kuie" magazine dated April 10 2013, regarding debt amnesty.
Could you please inform me as to how and where I can apply for debt amnesty?
Friedl Kreuser of 6cents, a division of Summit Financial Partners, responds:
It is still a proposed initiative, so no details of how and where to apply for debt amnesty are available.
The proposal by the department of trade and industry (DTI) and the National Credit Regulator is to remove adverse credit information on debt under R10 000, which they envision to have a positive effect on 86% of consumers earning under R15 000.
The DTI stated that the intention of the amnesty is not to encourage consumers to make more debt by simply wiping their credit record, but rather to create a clean slate for consumers to improve access to jobs and housing.
Consumers would still be expected to repay their outstanding debt (although it seems that it would not appear on their credit record).
The proposal has obviously met with some resistance from banks and some credit industry experts, as the concern is that it will merely encourage and enable consumers who are already struggling to make even more debt.
Banks claim it may also result in higher interest rates on unsecured debt, even for consumers with legitimately clean credit records, as banks will no longer be able to accurately assess a consumer's risk profile.
The 2007 debt amnesty was generally considered to be ineffective (research suggests that 64% of consumers who benefited from the 2007 amnesty subsequently applied for more debt and 74% of those ended up with three or more accounts in arrears - i e more adverse credit records).
However, the NCR is continuing research to consider alternatives, estimate the effect of the amnesty and fill the gaps that prevented the 2007 amnesty from being effective.
The terms and conditions of the amnesty has not yet been finalised, but the DTI is expected to make a final announcement in April, or soon thereafter. Previous statements indicate that the plan is to implement the amnesty around Christmas 2013.
Personally, I feel clearing credit records for struggling consumers - and thereby giving them access to fresh debt - without actively empowering them with practical money management would do more harm than good (especially over Christmas, the most notorious period for consumer overspending).
Without changing their spending habits and debt mentality, the dangerous debt cycle will likely only perpetuate.
Fortunately, the NCR has indicated that the proposed amnesty would go hand in hand with some sort of financial literacy training, which I can only hope will be taken seriously and properly implemented.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
I read an article in the Kuie" magazine dated April 10 2013, regarding debt amnesty.
Could you please inform me as to how and where I can apply for debt amnesty?
Friedl Kreuser of 6cents, a division of Summit Financial Partners, responds:
It is still a proposed initiative, so no details of how and where to apply for debt amnesty are available.
The proposal by the department of trade and industry (DTI) and the National Credit Regulator is to remove adverse credit information on debt under R10 000, which they envision to have a positive effect on 86% of consumers earning under R15 000.
The DTI stated that the intention of the amnesty is not to encourage consumers to make more debt by simply wiping their credit record, but rather to create a clean slate for consumers to improve access to jobs and housing.
Consumers would still be expected to repay their outstanding debt (although it seems that it would not appear on their credit record).
The proposal has obviously met with some resistance from banks and some credit industry experts, as the concern is that it will merely encourage and enable consumers who are already struggling to make even more debt.
Banks claim it may also result in higher interest rates on unsecured debt, even for consumers with legitimately clean credit records, as banks will no longer be able to accurately assess a consumer's risk profile.
The 2007 debt amnesty was generally considered to be ineffective (research suggests that 64% of consumers who benefited from the 2007 amnesty subsequently applied for more debt and 74% of those ended up with three or more accounts in arrears - i e more adverse credit records).
However, the NCR is continuing research to consider alternatives, estimate the effect of the amnesty and fill the gaps that prevented the 2007 amnesty from being effective.
The terms and conditions of the amnesty has not yet been finalised, but the DTI is expected to make a final announcement in April, or soon thereafter. Previous statements indicate that the plan is to implement the amnesty around Christmas 2013.
Personally, I feel clearing credit records for struggling consumers - and thereby giving them access to fresh debt - without actively empowering them with practical money management would do more harm than good (especially over Christmas, the most notorious period for consumer overspending).
Without changing their spending habits and debt mentality, the dangerous debt cycle will likely only perpetuate.
Fortunately, the NCR has indicated that the proposed amnesty would go hand in hand with some sort of financial literacy training, which I can only hope will be taken seriously and properly implemented.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
