CONSUMER ALERT

TAKING MONEY UPFRONT FOR THE PURPOSES OF IMPROVING CREDIT RATINGS IS PROHIBITED

Purpose:

The purpose of this communication is to alert the media and the public about credit repair entities and the upfront payment for this service, which is prohibited in terms of the Consumer Affairs (Unfair Business Practices) Act, 71 of 1988.

Issued by:

Education and Compliance directorate, Office of Consumer Protection

What does the prohibition seek to achieve?

Consumers should beware of companies that require upfront payment for services to clear their credit bureau record, as this is prohibited.

As we enter into the festive season many consumers seek credit in order to satisfy their spending needs. Those consumers who are unfortunate to have their application for credit declined due to an adverse listing on the credit bureaus will be tempted to turn to companies advertising the ability to ‘remove/clear’ one’s name from the ‘blacklist’ in the credit bureaus for an upfront fee.

This practice of taking money upfront by *‘credit repair entities’ for the purposes of improving one’s credit profile has been prohibited by the Minister of Trade and Industry under Notice 169 published in the Government Gazette in 1998. The regulation stipulates that companies may only accept payment once the service of improving one’s credit rating or clearing an adverse listing from the credit bureaus has been performed.

The prohibition is the result of an investigation by the then Business Practises Committee, now called the Consumer Affairs Committee, following numerous complaints from consumers alleging that that their credit records were not improved after having paid the required fees by credit repair entities claiming to be able to do so.

What action can consumers take?

In terms of the regulation, consumers have a right to obtain a copy of their credit profile from credit bureaus at a reasonable fee, usually not more than R20. Credit bureaus are required to provide an information service, i.e. a person to help interpret the information in the credit file.

The law requires credit bureaus to retain information relating to insolvencies and rehabilitations for a minimum of 10 years; information relating to judgements for a maximum of five years and for default in payment he information can be kept for a period of three years. Credit bureaus may only remove accurate, negative information from your file if it exceeds the periods mentioned above.

Consumers have the right to dispute inaccurate credit information or apply for rescission of judgements.

o A consumer would need to write a letter to the credit bureaus disputing the incorrect listing and providing any pertinent information and copies of all documents such as receipts and account statement to demonstrate the error.

o The credit bureau is then expected, at no fee, to investigate, modify and/or remove inaccurate information and should include a statement about disputed information in the consumer’s credit record.

o In the event that the credit bureau fails to resolve the matter consumers can lodge a complaint with the Credit Information Ombudsman at 0861 662 837.

o Consumers may also approach an attorney for assistance in applying for a judgement to be rescinded/reversed by the courts.

Consumers are advised that the credit bureaus play an important role, which benefits both consumers and credit grantors. Consumers can benefit by having the credit bureaus keep accurate and positive credit profiles, which improve their credit rating when applying for credit.

Finally, consumers should be aware that they have the right to cancel any contract with any person, business, council or association who runs a credit repair business within five business days from the date they signed it.

Consumers can also contact the consumer help line at the dti call center on 0861 843 384,

OTHER SERVICES:

The Education and Compliance directorate issues this information as part of an overall education service to consumers. The directorate also offers the following services:

· Advisory opinions and clarifications

· Presentations

· Information materials.

Enquiries may be directed via the consumer help line at 0861 843 384.

*The practice of taking an upfront fee in order to ‘remove/clear one’s name from the ‘blacklist of the credit bureaus is defined in the regulation as the credit repair business and the companies performing that practice are referred to as credit repair entities.