Consumer code for credit bureaus

This is the code that governs the conduct of credit bureaus

Consumer code for credit bureaus

By Roy Bregman
Bregman Mitchley Attorneys

This is the code that governs the conduct of credit bureaus

1. INTRODUCTION

Credit is a process whereby a consumer acquires goods and services without having to pay the full price immediately. The amount or balance is paid over a period of time out of future income. Many South African consumers who wish to have the use and benefit of items such as motor vehicles, clothing, furniture, other household equipment, professional and other services, must buy these on credit. The use of credit facilities to obtain goods and services has increased to a point where today most consumer spending, excluding food, is on a credit basis. In the absence of credit the standard of living of thousands of South Africans would suffer significantly.

It is in the public interest to promote a well-structured system whereby credit can be granted. The extension of credit, without regard for the ability of prospective customers to meet their commitments, leads to bad debt losses. This in turn leads to higher prices as these losses are unavoidably built into the costing structure and thus the selling price. It is the consumers who meet their obligations who pay the price for poor consumers credit standards and the payment failure of defaulting consumers.

In the interest of both businesses and consumers, credit grantors must consider consumers’ credit history in order that their ability to pay and payment diligence can be ascertained. Businesses may make use of the services of credit bureaus to obtain information regarding the credit record of consumers. Credit bureaus are businesses, which record the credit transactions and payment history of individual consumers.

This information is available to credit grantors when establishing a consumer’s eligibility for credit and for which a fee may be recovered. The vast majority of retailers, banks and service firms use credit bureau information, to a greater or lesser extent, in their credit decisions. Many of the larger firms have sophisticated credit-scoring systems. In addition to other factors, credit bureau information is utilised in the process of determining risk. Before granting credit, smaller firms may rely exclusively on information obtained from credit bureaus.

This code is intended to govern the conduct of credit bureaus. It embodies principles, which are observed by the majority of members of the industry. The principles set out are not intended to interpret, qualify or supplant the law of the land, and do not replace the legal relationship and whatever rights or remedies a consumer may have by virtue of any agreement, the common law or any legislation. It is nevertheless possible that obligations which are contractually agreed upon and which are not in conflict with statutory or common law, may still amount to unacceptable business practices in terms of the Harmful Business Practices Act.

The Credit Bureau Association of South Africa (CBA) approached the Business Practices Committee with a view to formalising a code of conduct applicable to all credit bureaus in South Africa. This code is based on the existing CBA’s Code of Practice and also has the support of The Joint Banks Credit Bureau (Pty) Ltd. The CBA has undertaken to ensure that its members comply with the provisions of this Code. A consumer who is dissatisfied with the treatment he has received from a member of CBA is urged to submit his grievance to CBA. Should a consumer also be dissatisfied with CBA’s handling of the complaint, the matter could be referred to the Business Practices Committee. Where there are complaints against credit bureaus who are not members of ACB consumers should contact consumer bodies, such as the Consumer Council or the Business Practices Committee, directly.

When complaints are directed to it, the Business Practices Committee will have regard to the provisions of the Code in assessing whether conduct complained of constitutes a harmful business practice, irrespective of whether such credit bureau is a member of CBA. In this respect the Code is more than a voluntary code of conduct. The Chairman of the Business Practices Committee may appoint a Credit Bureau Liaison Committee to advise it on matters concerning credit bureaus and herewith calls for proposals in this regard.

2. DEFINITIONS

  1. Credit bureaus (hereafter called bureau or bureaus) are businesses, which procure, record, maintain and make available to contracted subscribers and/or the consumer concerned, information concerning the manner in which consumers conduct their credit and business dealings.
  2. Consumers are natural persons who conduct their credit and business dealings personally or through corporate bodies.
  3. Subscribers, are businesses, organizations, associations, or any other body or individual, statutory or non-statutory, which extend credit facilities to, or have other business dealings with consumers involving the taking of a business risk in such dealings and who are entitled in terms of this code to use the services of a bureau or bureaus.

3. CODE

  1. Compliance procedures
    1. Credit bureaus must contract only with subscribers who warrant that they have a bona fide business reason to access the information, and who agree that the information will not be disseminated by them to any other party other than the consumer concerned. The contract shall provide for termination should these conditions not be compiled with.
    2. Whenever a bureau compiles a record, it must follow procedures to ensure that it obtains accurate, relevant and unbiased information about the person to whom the record relates. It must maintain a record of all subscribers who receive the information for a minimum of two years and of the source of each item of information.
    3. Bureaus have a duty to treat subscribers and consumers as fairly and impartially as possible.
    4. A bureau must take account of the interests of both consumers and subscribers in determining the nature of information to be recorded, stored and reported. Only such information relating to the credit and business dealings of consumers may be kept on file. Information of a personal nature may not be recorded except that which is necessary for evaluation and correlation. These include items such as full names, date of birth, identity numbers, addresses, telephone numbers, employment and marital details.

  2. Disclosures to consumers
    1. A bureau must upon request disclose to a consumer, who has satisfied the bureau regarding his or her identity, the nature and substance of all information and the sources of the information in its files on that consumer at the time of the request.
    2. A bureau must make the disclosures required during normal business hours and on reasonable notice.
    3. The disclosures required must be made to the consumer in person, provided he or she appears in person and furnishes proper identification. Written disclosure in response to a telephonic and/or written request may be made only if the bureau is satisfied that the request is from the consumer concerned. Disclosure may also be made to the consumer’s attorney upon written request from the attorney. No telephonic disclosures shall be made.
    4. A bureau must provide trained personnel to explain to a consumer any information furnished pursuant to 3.2.1. A bureau must assist consumers by providing reasonable advice on how to obtain changes to their records where possible.
    5. A bureau may charge a reasonable fee to allow consumers to inspect any information about themselves recorded and stored by the bureau and for the assistance mentioned in 3.2.4. Where such disclosure leads to the deletion of information pursuant to 3.3.1, the fee must be refunded to the consumer.

  3. Procedure in case of disputed accuracy
    1. If the consumer informs the bureau that he disputes the completeness or accuracy of any item of information contained in his file, the bureau must within a reasonable period of time reinvestigate and record the current status of that information unless it has reasonable grounds to believe that the arguments raised by the consumer are frivolous or irrelevant. If after reinvestigation the information is found to be inaccurate or can no longer be verified, the bureau must delete the information promptly and notify all relevant subscribers accordingly.
    2. If the reinvestigation does not resolve the dispute, the consumer may file a brief statement setting out the nature of the dispute. Where the consumer does not dispute the information but does have a reasonable explanation for the occurrence(s), the bureau may place a brief explanation on file provided satisfactory evidence corroborating the explanation is produced and the explanation is not frivolous or irrelevant.
    3. Whenever a statement of dispute is filed, the bureau must, unless there are reasonable grounds to believe that it is frivolous or irrelevant, in the record containing the information in question, clearly indicate that it is disputed by the consumer and provide either the consumer’s statement or a clear and accurate summary of it. The bureau must notify all relevant subscribers accordingly.
    4. In the event of a dispute between a consumer and a bureau, which is a member of the CBA, about the accuracy or relevance of information on file, the bureau or consumer may request the CBA to investigate the matter and give a ruling on it in terms of the CBA’s constitution. In the case of a dispute between a consumer and a bureau that it is not a member of the CBA, the Business Practices Committee may be approached.

  4. Periods for which information must be retained
    1. Bureaus must ensure, taking into account cyclical economic trends, that sufficient time elapses before deleting essential credit information. This obligation must be balanced against the interests of the consumer who should not be burdened by stale information about long-past credit defaults. Essential credit information must be retained and must be reported in full upon request for the following periods:
      1. insolvencies and rehabilitation’s for a minimum of 10 years
      2. judgments for debt and information supplied by subscribers for a maximum of 5 years or until a 5-year period has elapsed during which no further references to any defaults have been added to the record.

  5. Disclosures to other parties
    Notwithstanding the provisions of clause 3.1.1 of this Code, bureaus may furnish information about a consumer to any party who in terms of legislation is entitled thereto, provided that written evidence of entitlement is provided.

4. ADDRESSES

All correspondence for the Business Practices Committee should be addressed to:

The Secretary
Business Practices Committee
Private Bag X84
PRETORIA
0001

All correspondence for the Credit Bureau Association should be addressed to:

The Executive Director
Credit Bureau Association
P O Box 41887
Craighall Park
2024