Amnesty for blacklisted people

A new law South African law requiring lenders to erase defaulters’ credit history took effect Tuesday despite protests from banks and opposition parties that branded the move as populist vote-buying.

Credit bureaux now have two months to wipe “adverse consumer credit information” from their records, according to the law, which comes ahead of elections on May 7.

“The amnesty doesn’t remove the debt, it just removes the information related to an account,” said National Debt Mediation Association CEO Magauta Mphahlele.

Information to be scrapped includes descriptions of defaulters, unreachable debtors and sheriffs’ orders.

“You don’t have to have paid off that debt to have the negative description removed,” Mphahlele told AFP.

“But if the credit provider has obtained a court judgment against you, that judgment will only be removed if it has been paid.”

Almost 10 million South Africans — 48 percent of people with credit records — are in arrears on payments or have seizure orders to their names.

Blacklisted consumers battle to secure loans, rent housing or subscribe to certain services.

Some also struggle to find work since their employers use the credit system to check up on job applicants.

Access to credit in South Africa has widely expanded since the advent of democracy in 1994.

But many poorer citizens are trapped in debt, often taking unsecured loans at up to triple the normal interest rates.

Low-income consumers often fall prey to loan sharks to fund ostentatious lifestyles, buying clothes and electronic equipment on credit.

Banks opposed the new law, saying it left them little means for tracking a loan applicant’s payment behaviour.

Opponents have also slammed the law as an election ploy ahead of May 7 polls, in which the ruling African National Congress looks set to win a reduced majority.

Many misunderstand the law to mean their credit itself has been scrapped, said Mphahlele, who raised concerns that it would not make consumers more responsible spenders.

“We don’t see how it will impact on the repayment behaviour of consumers,” she said.