On 5 September 2013, the South African Cabinet released a statement confirming its approval of credit amnesty. According to the statement, the “credit amnesty seeks to address the issue of access to credit to those South Africans that can afford credit. These are consumers who may have paid their debts in full and are in a position to afford credit but whose access is currently impeded by negative credit information on their record.” If all goes according to plan, it would appear the credit amnesty may be implemented by the end of this year.
However, according to Renee Marais, a Debt Counsellor and regular Rietmark advertiser, credit amnesty might not be such a good idea, here is why:
Consumers who have paid off their debt, but due to financial issues struggled to do so within the time set out by creditors will be able to receive credit amnesty when it is approved by Government. It means that your name will be cleared at all the credit bureaus and enable you to apply for new credit, e.g. finance a new car, take out a loan for a holiday or get a credit card.
In effect this is an artificial way to get more people to apply for credit who do not currently qualify due to blacklisting. It is a way for the credit industry to stimulate the economy by providing more spending from consumers. But is this a good plan? How will creditors know that you will repay them the loan? The National Credit Act specifically warns against providing a loan to a consumer who does not qualify. How do they do that? The creditor has to refer to a credit report and the consumer has to fill in an affordability assessment form.
What will happen now is that consumers who should not qualify for more credit will get more credit and ultimately the consumer is the one who will end up in financial trouble. If a creditor did not do an affordability assessment, the credit may be declared reckless. Approach a debt counsellor registered with the NCR to assist you with this if you suspect this happened to you.
Before granting the credit the creditor must also obtain a credit report from the reputable credit bureaus listed with the NCR (www.ncr.org.za). A consumer will now be cleared from the ITC reports and may on the face of it qualify for credit. This might allow for easier credit or the creditors may not want to grant credit to legitimate consumers as they will not know if you have always been a good financial manager of your finances or if you were cleared by the Amnesty.
With Credit Amnesty, consumers will have their names cleared and a clean ITC record. That is good. But the reasoning behind why this should be done, is to generate more money in the credit industry artificially and I warn consumers against this. Do not borrow money for luxuries and remember that vehicle finance on residual value is not a good investment as you will pay more than double for your car. Credit card and overdraft interest rates are the highest and will cost you more at the end.
Please look at your spending before obtaining more credit even if you do obtain Credit Amnesty. There are professional people out there that can advise you to restructure your budget and in doing so free up more spendable income without you having to resort to more credit. Debt Counsellors know the National Credit Act and can assist you by informing you of your rights and obligations as well as those of the creditors.
A consultation and restructuring of your monthly budget will cost you a small amount but you will leave financially empowered.
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