The newly approved Credit Amnesty regulation created waves when it was announced in 2013. Credit providers were up in arms when it eventually took effect in April 2014, despite protests from some banks, credit lenders and opposition parties, who said the move was politically driven and a ploy by the African National Congress (ANC) to buy votes.
Credit providers also pointed to the fact that it would make credit vetting a lot more difficult, but overly indebted consumers were ecstatic as it would mean a clean slate to begin a new credit history.
Higher Day to Day expenses
Since the announcement and implementation of the Credit Amnesty regulation there have been a few developments that have taken place.
E-tolls have gone live and Gauteng motorists are now incurring a new expense and if not paid, a new debt. Interest rates have gone up resulting in further pressure on the average South Africans’ disposable income. Fuel has increased twice to such an extent that it is predicted we will be paying close onto R16 a litre for petrol soon.
All these factors weigh heavily on our finances and our ability to service debts. This perpetuates a trend among South Africans towards a higher default rate on credit agreements as consumers struggle to make ends meet whilst paying for necessary day to day expenses.
A Fresh Start
But while the Credit Amnesty will offer us a once-off clearing of bad debit data, it will not actually give consumers the option of not repaying their loans.
It has become even more important for consumers to stay on top of their debt obligations as the amnesty would give consumers some relief but will not absolve them from paying their debt.
There are also pitfalls with regard to the amnesty and future applications for credit. Consumers may end up paying more in interest as financial institutions raise interest rates to counter the increased risk of previous judgments and defaults not reflecting on credit histories. Thus the cost of credit will be increased for all average South Africans.
Free Personal Reports
The need to review your credit status is also becoming more important so that you remain in control of your credit score. Our advice is that you monitor your credit reports from Compuscan, Experian, TransUnion and XDS so as to ensure that your credit history is a true reflection of how you conducted your debt repayments. You are entitled to one free report, every year, from each one of the bureaus.