Impaired credit records on decline

4 July 2016

NCR report shows number dropped by over 300 000 since December


South African consumers with impaired credit records dropped by more than 300 000, while those with good credit history increased by more than 450 000 at the end of this year’s first quarter.

This is according to the National Credit Regulator (NCR), who on Friday released the latest Consumer Credit Market Report and the Credit Bureau Monitor, based on data submitted to the regulator by registered credit providers and credit bureaus covering credit market information up to March.

The number of applications for credit decreased by 11.72 percent quarter-on-quarter from11.32 million in December to 9.99 million in March, while the total value on new credit granted decreased by 12.74 percent quarter-on-quarter from R124.15 billion to R108.33bn.

Credit bureaus held records for 23.88 million credit-active consumers, an increase of 0.59 percent when compared to the 23.74 million in the previous quarter.

Consumers classified in good standing increased by 460 00 to 14.33 million consumers. The number of consumers with impaired records has decreased by 320 000, from 9.87 million to 9.55 million from the quarter ending March. The number of impaired accounts decreased from 9.87 million to 9.55 million when compared to the previous quarter, a decrease of 67 000 quarter-on-quarter and 2.45 million year-on-year.

Nomsa Motshegare, chief executive of the NCR, encouraged consumers to only use registered entities when doing business as this would advance their rights as provided in the National Credit Act (NCA).

This includes registered credit providers, credit bureaus, debt counsellors, payment distribution agencies and alternative dispute resolution agents.

Motshegare said the Minister of Trade and Industry, Roy Davies, had determined a new threshold of nil (0) for the purpose of determining whether or not a credit provider was required to be registered with the B+NCR from May11.

“This means that any person or entity that is involved in the provision of credit is now required to register, irrespective of the number of agreements and/or the value of the principle debt.”

Ian Wason, chief executive officer of DebtBusters said the company had seen an increase of up to 90 percent of enquiries from debt stressed South Africans this year.

“Until credit active consumers start taking control of their debt and stop using credit to live, we won’t see a true turn around. The changes implemented by the NCR are helping, but it’s simply not enough. South Africans need to change how they manage their money, starting with knowing their credit score and what their bureau data looks like.”

Wason said credit reports were the first and most important step towards debt rehabilitation.” “We provide our clients with easy access to their credit reports so they can learn how to read their bureau reports and how to improve their credit health.”

Clif Johnston, vice-president of the South African Consumer Union (Sancu), said the reduction in the percentage of consumers with impaired credit records was encouraging. “Sancu believe this is largely due to a more responsible approach by registered credit providers, following the increased intervention by the NCR in recent months. Unfortunately, this more responsible behaviour has not filtered through to all consumers.”

Johnston said when consumers, desperate for credit, were turned away by the registered providers, they were often drawn to unregistered operations, which was a risky approach.

He said the union has recently received complaints from consumers about on-line operations that appeared to offer loans, but in fact duped applications who didn’t read or understand the fine print into signing up for a different service “The “loan” never materialises and consumers are then faced with monthly “service fee’ deductions in terms of agreement, which only worsens their financial plight. Situations like this do not find their way into official statistics, so the reality might be much worse than indicated.”

Source: Cape Argus. July 4, 2016.