Know your status

Source: Iona Minton

This article is a printout from iafrica.com
Copyright © 2000 iafrica.com*, a division of Metropolis*

Thu, 14 Apr 2005

There are two main consumer bureaus in South Africa and between them they know just about everything there is to know about your credit activities. But what do these listings actually mean for you?

The bureaus, Experian and TransUnion ITC, gather your personal details — name, ID number, sex, marital status, contact numbers, addresses, employer and, believe it or not, aliases — as well as negative listings. These can be judgments, bank defaults, defaults, collections, notices, notarial bonds, trace alerts, and payment profiles.

All of this information is kept in reports that credit grantors use every day to decide if you are a good credit risk. Once you have entered the financial system, by opening a bank or department store account, your record starts to build. It requires discipline and planning to maintain a good credit record and the opposite to mess it up. Once you start obtaining ‘negative listings’ on your credit report it may take years, and a lot of professional help, to get it cleaned up.

How does a company obtain a judgment?
To obtain a credit judgment, your creditor must approach a magistrate’s court with a well-documented case against you. The objective behind obtaining a judgment is that it gives your creditor a whole series of new rights in relation to your personal income and property. With a judgment in place, your creditor can instruct the sheriff to, politely but forcibly, attach and confiscate your furniture and fittings.

If the sheriff can’t find you, or any of your possessions, the judgment will still serve the interests of your creditor because — in order for you to qualify for credit during the next five years — you will have to pay the debt and request permission from the court to have this negative listing removed. When a judgment is removed from your credit report the legal term for this is ‘rescinded’.

When a judgment is rescinded, it is effectively reversed, but your loss of personal dignity, possessions and income may take a lot of time to heal. The judgment will come off your credit record at the bureaus and the magistrate will require your specific credit grantor to ‘expunge’ this episode from their in-house records. When (and if) this is all done, you will be back on a level footing regarding your ability to borrow money.

If you do not take steps that result in the rescission of a judgment it will remain on your credit record for a period of five years. It will also remain as a source of public record (in the courts) for up to 30 years and, for as long as the judgment exists, your creditor can use it to demand payment.

In summary, your creditor uses the judgment to collect money from you through:

What about bank defaults?
A bank default occurs when you do not repay a bank loan. This would usually be a small loan, totaling a few thousand rand, that really wasn’t big enough for your bank to hand over to a collection agency in pursuit of a judgment.

This ‘blemish’ will remain on your banking record for three years and will generally make it very difficult for you to obtain credit from banks. You may get credit from the bank that made this listing, if your new deal includes a repayment plan for the old debt. When the debt is paid up, an arrangement can be made for this listing to be amended to ‘fully paid up’ or, better still, removed from your record.

What is a normal default?
This type of listing applies to a default with any other type of creditor. These would include small businesses, medical practitioners and non-bank lenders. The listing would also remain on your record for three years and should be dealt with if you want to carry on doing business in an unrestricted manner. Again, it is well within your interest to look for a way to settle the debt in conjunction with an agreement to have the listing amended or removed from your record.

The Consumer Credit Association
Most of the major retailers are members of an organisation called the Consumer Credit Association (CCA). This organisation has its own set of rules, which include the requirement that listings may not be removed within less than three years, unless you can prove that the listing was a mistake or not your fault. This is tricky, to say the least!

Repaying the debt, in full, won’t usually get you off the hook either but it will give you the right to have the listing amended with the note ‘Paid in Full.’

Non-CCA Members
Almost everyone else who might give you credit, will fall into this group and — because there is no formal set of rules governing them — it is usually possible to have one of their negative listings removed in return for the appropriate settlement.

Collections
When it is obvious that you cannot, or will not, make the necessary payments on an outstanding debt your ‘file’ will generally be handed over to a collections agency — unless the lender in question is big enough to have its own collections department. Collection agents know a lot more about the law than most consumers and they will try to make you feel very uncomfortable within a short time after receiving your case. Their approach often yields results because, if you are like most people, the idea of having a sheriff take away half of your possessions will turn your stomach.

How many people have negative listings?
If you’ve had a little trouble paying certain bills you’re certainly not alone. Each month, around 100 000 judgments are taken in the courts around South Africa. In addition, around 200 000 new default listings are recorded with the main credit bureaus.

But the volume of negative listings each month doesn’t mean that you will somehow get lost in the crowd. If you have a messy credit record, clean it up. You can visit www.credithealth.co.za for more information on how to do this.