The credit ombud’s office has been given the added responsibility of handling complaints related to the debt review and debt counselling process, and has received a flood of such complaints – in one case the ombud prevented a bank from auctioning a woman’s house.
The credit ombud, Manie van Schalkwyk, has had an influx of debt counselling complaints just a few months after his office’s jurisdiction was expanded. In one case he convinced a creditor to call off the sale-in-execution of a consumer’s property the day before it was scheduled to take place.
The consumer (Mrs X) had applied for debt review in December 2009. However, her debt review was cancelled by her creditor in April 2010 on the grounds that she had allegedly defaulted on her debt repayments. Mrs X then approached both her debt counsellor and the National Debt Mediation Association for help.
She approached the credit ombud just one week before a scheduled sale-in-execution of her property. The credit ombud was able to confirm that Mrs X had not skipped any debt repayments and, on the afternoon before the day of the sale, the creditor agreed to hold off on legal action pending further investigation by the ombud.
According to the credit ombud’s annual report for 2010, consumers appear to be complaining mostly about not receiving statements or finding that payments are not allocated properly when dealing with non-bank credit providers. They also complain that monthly payment profile records are not being updated regularly by credit bureaus.
The credit ombud’s office was initially established to hear consumer complaints related to credit bureaus. However, during the course of the last year, the jurisdiction of the ombud has been increased twice – first to hear complaints related to non-banking credit and then to hear complaints related to debt counselling matters.
Van Schalkwyk says that during the last year, his office opened 465 complaints for complaints related to non-bank credit disputes and managed to arrange either a saving and/or payback of a cumulative R700 000. A total of 3 870 complaints were lodged with Van Schalkwyk’s office during 2010, of which more than 90% were finalised.
“We ruled in favour of consumers in 69% of cases, and 86% of all cases were resolved within two months,” he says. Most of the complaints (29%) related to insufficient or incomplete credit information listed on consumers’ credit profiles and 22% related to negative credit information remaining displayed on a credit bureau’s records for a longer period than that dictated by the National Credit Act (NCA). Van Schalkwyk says judgments, in particular, were a problem.
When you have paid off a creditor who has lodged a judgment against you or if you can prove that you were not in default when the judgment was made and the creditor concerned agrees in writing, you can apply for a rescission of judgment. A rescission of judgment is granted by a magistrate’s court and means that the judgment is removed from court records as though it never existed.
“Firstly, we found there was an increase in the number of fraudulent rescission documents being produced by consumers. Secondly, monthly payment profiles were not being updated by credit providers, with the result that genuinely rescinded judgments were not being purged from credit bureaus’ records,” he says.
According to the Credit Burea Monitor, published by the NCR, 46.5% of South Africa’s 18.5-million credit-active consumers had impaired credit records in December 2010. “This means that 8.61-million people will find it difficult to access credit as a result of their credit record,” Van Schalkwyk says.
The credit ombud now handles three different types of complaints: those related to credit information held at credit bureaus, those related to non-bank credit, and those related to debt counselling. Here are examples of two other types of complaints received by the ombud in the past year and how they were resolved:
- Credit listing. A consumer (Mr Y) complained of a default listing against his name at the credit bureaus. He had wanted to buy building material and applied for a loan through the building material supplier. An amount of R5 563 was credited to a building material supplier but Mr Y never received the goods. The building material supplier then went completely bankrupt and the creditor informed Mr Y that he now owed an amount of R11 028. By the time Mr Y lodged a complaint with the credit ombud, the debt had increased to R17 444 with interest. The credit ombud found that the debt had prescribed – if your creditor does not take judgment against you within three years of you defaulting on your debt repayments, then its claim against you lapses or expires. The creditor was unable to prove that prescription had been interrupted by a payment from Mr Y in the three-year period. As a result, the default listing was removed from the credit bureaus and the debt was written off.
- Non-bank credit. The complaint was from Mr Z. He had a garnishee order – a court order which gives a credit provider the right to attach part of your salary each month to pay your outstanding debt. Mr Z’s garnishee order was for R900 a month, which he could not afford and he told the ombud he had already paid part of the debt. The ombud found that the original debt collection attorneys had absconded and payments had not been forwarded to the credit provider. New collection attorneys appointed by the credit provider then started deducting money from Mr Z’s salary via a re-issued garnishee order. The office of the credit ombud was able to establish a paper trail for the initial payments and Mr Z was refunded about R4 000.
- First published in Personal Finance newspaper on 16 April 2011.