Cabinet's recent approval of a credit information amnesty means that responsible lenders will have an even more important role to play in determining whether consumers can realistically afford credit.
Wonga.com SA chief executive Kevin Hurwitz said that granting of credit is vital to a healthy economy. Enabling consumers, who have been unable to access credit due to adverse blacklisting on their names, should be seen as a positive development for the economy provided it does not place extra financial stress on them.
Therefore, the responsibility is on the credit provider to make accurate and reliable credit decisions about the worthiness of applicants. Credit providers should be able to trust their own risk management processes to be strong enough and have skilled staff to make credit decisions without relying exclusively on credit bureau listings.
Additionally, there is no need to increase the cost of credit because of the credit amnesty decree as it is the responsibility of the credit providers to ensure they are doing enough assessments on the consumer’s capability to repay the loan.
The implementation could result over-indebtedness among SA consumers when granted renewed access to credit without any policies, including to those already impaired or struggling to cope with existing financial commitments. All consumers need to realise that the debt itself will remain and we will not receive a free “get out of jail” card and we are still liable for the debt itself.
Hurwitz says that in terms of Wonga's own system, where prior to this consumers with adverse listings would have been rejected straight away, now they will proceed through the company’s own automated risk engine.
"There will always be a mainstream need for credit, as a consumer's variable outgoings coincide with the consumer's fixed income, and so in this way credit will always be a vital part of the economy. However, the credit providers now have a greater responsibility to ensure more thorough checks are in place before credit is granted to ensure that not only consumers, but the economy does not suffer," concludes Hurwitz.
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