Capitec Bank CEO, Gerrie Fourie, has been leading the charge of negative comments recently.
While having to deliver less than fantastic stats about how the bank is performing, he has also been claiming that debt review is
(1) shrinking the credit market and
(2) hurting clients’ chances of getting credit in the future.
Why might he be saying that?
Well, many Capitec clients actually do need debt review.
In the last two years, they’ve set aside an extra +- R1 billion in provisioning, because some of their customers are struggling to pay what they already owe, and are entering debt review. Their total debt review provisioning now stands at R6.3 billion, that’s a fairly large amount of money.
‘Their total debt review provisioning now stands at R6.3 billion’
Capitec also notice that many people who start debt review, often do not finish the process, and because the credit bureaus keep a record of the debt review even though the consumer stops working with a Debt Counsellor and stops paying via one of the 4 NCR registered Payment Distribution Agents (PDAs), credit providers are scared to lend them more money.
They are worried they are later told they have been “reckless” in their lending, resulting in the consumer not being forced to repay that credit. So, often they tell the consumer they can’t help them. This does upsets the consumers who are forced to carry on paying off their debts (but without the benefit of a Debt Counsellor’s help and all the amazing benefits the banks offer via debt review). These drop-out consumers are stuck living with the consequences of their bad choices, and it really stings.
But is Mr Fourie correct in saying that debt review hurts consumers’ future prospects of getting more credit?
While these consumers are listed at the bureaus, and are forced to pay off their debts, they can’t go around making more debt. But what about later down the line?
Interestingly, the National Credit Act actually requires that once a person’s debt review is completed and all their debts are paid off, the record must be removed from credit reports, so, no future problem.
The only possible way then that this might hurt the consumer, is if Capitec internally keep records and then illegally discriminate against the consumer for having entered debt review in the past.
‘The National Credit Act also makes it illegal to discriminate against a consumer who uses a provision of the Act to deal with debt or credit’
The National Credit Act also makes it illegal to discriminate against a consumer who uses a provision of the Act to deal with debt or credit. So, the only way this might be true is if the bank decides to break this law – which they obviously would never do.
So, the comments made are strange and seemingly have little foundation in reality.