Credit black listings out of control

Image courtesy Chance Agrella/

A ground-breaking decision by Cabinet to have adverse credit information of consumers who have already paid their debts removed from credit bureaus and other records, has sparked pointless and unnecessary controversy.

In short, it is plain dishonest.

Like a petulant child, the banking industry in particular, is throwing its toys out of the cot warning that the move will “heighten their risks and increase the cost of credit”. So what if it did?

Some records show that some 1.6 million consumers who have settled their debts are still listed by credit bureaus and as a result, are not allowed access to credit. However, the figure could be much higher than this.

If you combine all the black-listed consumers including those who are currently still not able to pay their debts, it is a whole new market. That is why some institutions including cellular contract providers have tailor-made special products for this particular market.

Back to the main issue:

These adverse entries are a nightmare – they are like life sentences. Some prospective employers use them to rate the trustworthiness of the job applicant. Boards of companies have also been proven to use these adverse entries to judge a prospective board member. Estate agents equally use credit bureaus to grant or turn down applications for accommodation.

These entries are lethal. But the worst is that they stay in the records for years, even when the consumer has settled the debt.

Whether the banks and associated industries throw their toys or not, this is wrong and there are valid reasons for it.

Issues in this context are really simple, unless you are hellbent on short-mindedness.

On the issue of “heightened risks” for banks, this really does not hold water for the mere fact that banks and other credit providers are in the business of risk management anyway. It is their core business.

Banks, like other industries, are well aware that government will pass laws. That is a given. But the question is why do banks think that the laws will always be in their favour? The banking system is flawed in many, many ways. Their dependence on credit bureaus for information is nothing short of laziness.

Credit Bureaus are a disaster. A lot of information at their disposal is outdated and inaccurate. This is also applicable to long-settled debts. The name of the consumer will still remain in the records forever. Is that not unfair? Consumers who attempt to clear their names are sent from pillar to post by staff members who lack professional skills.

The problem with imposing a credit”life sentence” on the consumer is that people’s circumstances change and the banks know that very well.

You could be in trouble today and two years later become a multimillionaire. It is a fact of life. Do not tell me a bank would be prepared to lose a new tycoon worth R160 million because of an adverse entry of R675 committed two years ago. Would this make sense? And please do not tell me this is an exceptional case. It is not. The principle is the same.

The move is aimed at securing the re-entry of these consumers into economic activity. So, that is where our hypothetical R160 million rand tycoon comes in. He/she is back in active market participation and can start doing deals to maximise his R160 million – as simple as that.

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