At the end of September 2013, after months of debate and
consultation, Cabinet announced its approval of the "credit
information amnesty" proposals as put forth by the select
committee on trade and international relations. Government has
embraced these recommendations as a way to assist consumers in
accessing credit where they can afford it, but are unable to obtain
access due to past adverse information.
Since 2006, South African household spending has consistently
outstripped domestic income – the difference primarily being
funded by credit. This has resulted in a situation where 6 200
South Africans are applying for debt counselling each month and,
according to the National Credit Regulator, one in two
credit-active South Africans have impaired records, a measure
indicating the state of having an account in arrears for a period
of at least 3 months.
In an attempt to combat this general over-indebtedness, Cabinet
has adopted a decision that will result in the elimination of all
adverse credit information regardless of value or debt non-payment.
Further, all adverse credit information relating to paid-up debts
will be cleared on an ongoing basis once the outstanding debt is
repaid. Government expects this to affect about 1.6 million South
Africans, assisting them in not only acquiring credit (a move that
is hoped to boost consumer demand) and incentivising them to repay
that debt, but also, and perhaps more importantly, assisting people
in getting jobs which their negative credit history had previously
prevented them from acquiring.
Credit providers and rating agencies have criticised the
proposals, arguing that, without a history of how consumers
previously managed their debt, the risk of more consumers
defaulting would increase, resulting in a general increase in the
cost of credit. Reserve Bank Deputy Governor, Lesetja Kganyago,
encapsulated these fears when he warned that the amnesty may
"undermine the flow of credit" and cause inappropriate
expectations as "you have an amnesty now and a few years down
the line people will ask, 'Give me some more.'"
Questions have also been raised regarding the efficacy of such
an undertaking. A similar credit amnesty was granted in 2006 which
seemingly resulted in undesirable borrower behaviour. According to
South Africa's Credit Bureau Association's statistics, 64
percent of those affected by the 2006 amnesty took on more debt. Of
these, 48 percent had defaulted or had a judgement against them
within 5 years. Based on this, the risk of a moral hazard is
seemingly present, and the resultant increase in borrowing costs
may have perverse consequences, namely the restriction of credit
Although commentators have widely suggested that the amnesty
will affect loan portfolio performance, the extent of the possible
ramifications remains unclear. Research by Fitch Ratings suggests
that the effect on the large lenders will be limited, as these
banks will still have access to their own borrowers' history.
Non-bank lenders, many of whom are dependent on credit bureaus for
risk assessment, may find themselves in a much more precarious
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