Debt Review Clarity: NCR Mandates Accurate Credit Bureau Reporting
Struggling to Secure New Credit After Debt Resolution Now Under Scrutiny
Consumers who successfully complete debt review often face a new hurdle: the inability to secure further credit. This is because their credit histories are sometimes cleared entirely, leaving lenders unable to assess their creditworthiness. The National Credit Regulator (NCR) has stepped in with new guidelines to rectify this situation.
NCR Acts to Prevent “Thin File” Classification
The NCR has issued a directive to credit providers, ensuring that consumer payment information is accurately updated with credit bureaus following the completion of debt review. The regulator identified instances where providers failed to submit this crucial data, as mandated by the National Credit Act. This omission left consumers without a payment profile, leading to them being incorrectly labeled as “thin-file” individuals by lenders. A thin file signifies a minimal or non-existent credit history, making it challenging to obtain new credit.
Mandatory Information Submission for Lenders
According to Section 69(2) of the National Credit Act, credit providers are required to report specific information to credit bureaus when entering into or amending credit agreements. This includes details such as the provider’s name and registration number, consumer identification, credit limits, repayment schedules, and the final satisfaction date of the obligation. Furthermore, Regulation 19(13) mandates that credit information be submitted in the format prescribed by the NCR.
Defining Consumer Credit Information
“Consumer credit information” is broadly defined by Sections 70(1)(a) and 70(2)(d) of the Act. It encompasses a person’s credit history, including past credit applications, agreements, payment patterns, and debt re-arrangements. Financial history, employment details, and personal identification information are also included. Registered credit bureaus are legally obliged to retain this information for the prescribed periods, regardless of its nature.
Correct Procedure for Clearance Certificates
When a consumer receives a clearance certificate after completing debt review, Section 71(5) of the Act specifies what must be removed from credit bureau records. This includes the fact that the consumer was under a debt rearrangement order, any information about defaults that led to the arrangement, and records of specific credit agreements being part of the review. The NCR emphasizes that only this specific information should be purged, not the entire payment history.
In South Africa, approximately 30% of households are considered over-indebted, highlighting the significance of effective debt management and accurate credit reporting (National Debt Advisors, 2023). This new guideline aims to ensure that consumers who have demonstrably managed their debt responsibly are not penalized with an invisible credit file.