Introduction:

Honourable members of the portfolio committee, thank you for the opportunity for allowing me to make a presentation to you. I speak on behalf of the Credit Bureau Association of South Africa, which is the industry body for credit bureaux. The members include Experian, TransUnion itc, Compuscan, and Trade ref. ABSA Bank, First National Bank and Nedbank are affiliate members. The credit bureaux industry fully supports a regulatory framework for credit bureaux, and the primary aims objectives of the bill.

Because of the perceptions around credit bureaux and public opinion, I need to begin with some background information. How does the credit information system function? Lets use an example, a consumer lets call her Nomsa, obtains credit from Woolworths, she pays monthly when her payment is due, this information that Nomsa is paying her account on time is supplied by Woolworths to the credit bureau on a monthly basis, Nomsa then decides to seek credit from Truworths, Truworths looks at Info on a credit bureau and is able to see that Nomsa pays her Woolworths account on a monthly basis on time, this is positive information which helps Nomsa to now get credit from Truworths. At least 80% of the information on the credit bureau is positive and facilitates access to credit. If for some reason Nomsa stops managing her finances properly and falls into arrears with both her Woolworths and Truworths accounts, Woolworths and Truworths may list Nomsa as a defaulter or "blacklist" her. If Nomsa goes to say Standard Bank for a loan, some clerk will tell her that the credit bureau blacklisted her, they won't tell her that Woolworths and Truworths listed her as a defaulter on the credit bureau. This has led to thousands of consumers believing that credit bureaux blacklist and deny them access to credit, which has led to immense anger and frustration with credit bureaux. It's a case of incorrect perception, and education will go a long way in rectifying this. In fact credit bureaux do not blacklist they report the information provided to them by credit providers, who warranty that information to be correct. They also report court orders and judgments taken by credit providers which is public information. It should be clear that credit providers supply data to credit bureaux who store this data on behalf of credit providers; in fact the reason why credit bureaux exist all over the world is because credit providers, want to share THEIR information

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of this section, for purpose of verifying that information has been corrected;" (

add the word "bona fide", to prevent people from lodging frivolous disputes

just for obtaining another free report)

vi)PAGES 43,44 AND 45: SECTIONS 70(6), 71(6),72(6): CHANGE THE WORD

(Let a person pay 10% of annual turnover as a fine but do not send a person to jail for a

commercial error)

B) TECHNICAL AMENDMENTS FOR LEGAL CERTAINTY. CLARITY AND TO PREVENT AMBIGUITY: (THE UNDERSTANDING IS THAT THESE TECHNICAL AMENDMENTS ARE CONSISTENT WITH THE INTENTION OF THE LAW-MAKERS)

i) PAGE 44: SECTION 72(1)(d): should read : 'be compensated by the credit provider who reported incorrect information for the cost of correcting that information." (change words "any person" to "credit provider").

ii) PAGE 43: SECTION 70(2)(d): Add the following words: "The Minister in prescribing data retention periods must have regard to the predictive power of that information for credit risk assessment"

iii) PAGE 43: SECTION 70(2)(e): Add the word "minimum" before the word"

standards", to ensure competition above minimum standards.

iv) PAGE 43: SECTION 70(2)f): Add the words" The Minister in prescribing what consumer credit information is not permitted to be kept, must have regard to whether or not the information may be used for predicting risk" (to ensure that information important for risk assessment is not required to be removed)

v) PAGE 43: SECTION 70(2)(g): Add the words" upon payment of the credit bureau fee except where the Act specifically provides that no fee be charged" (important to bear in mind that the business of the credit bureau is to issue credit reports)

vi) PAGE 81:SECTION 151(2)(a): add the words: "up to a maximum of 10 percent of the respondent's annual turnover." (give the tribunal discretion to determine an appropriate fine in less serious contraventions so the "fine" can fit the "contravention".

i) PAGE 43: SECTION 70(2)(c): should read: "take reasonable steps to verify the accuracy of any prescribed consumer credit information reported to it, that reasonably can be verified by the credit bureau" (words added are in bold, impossible for credit bureaux to verify every piece of payment information received).

ii) PAGE 43: SECTION 70 (6): should read: "A credit bureau must in terms of section 72(1 )(c) investigate every challenge of data, if data is found to be inaccurate the credit bureau must remove it or correct it failure to do so is prohibited" ALTERNATIVELY IT MAY READ " It is prohibited for a credit bureau to contravene this section by knowingly providing a report to any person containing inaccurate information." (take out the word negligently substitute the word "offence" with " prohibited", not fair for credit bureaux to face imprisonment for incorrect info supplied by credit provider

iii) PAGE 43: SECTION 70(4):" The Minister may prescribe minimum standards for the filing retention and reporting of consumer credit information by credit bureaux in addition to requirements set out in this section, and the Minister may set reasonable fees for consumer credit information to be provided to consumers and the National Credit Regulator" (should not fix set standards, must be room for competition above minimum standards, and Minister should not fix the fee that credit bureaux charge large corporates)

iv) PAGE 44: SECTION 72(1)(b): should in addition provide: "The Minister may prescribe how free credit reports are to be issued in the first effective year of the Act, for example those denied credit on the grounds of a credit report, or month of birth basis" (To prevent credit bureaux from processing up to nine hundred thousand requests per day in the first month of the Act being passed)

v) PAGE 44: SECTION 72(1)(b)(i)(cc): should read "once within a reasonable period after lodging a bona fide challenge regarding any information in terms maximum of 10% of annual turnover, so the tribunal has the discretion to ensure that the fine fits the contravention.

We understand that this is well intentioned and is a way a giving consumers a chance to rehabilitate themselves, but do take a moment to consider unintended consequences, credit providers will the see the info as less reliable and incomplete, they will be unable to properly separate good payers from bad payers, and may increase prices for everyone (good payers and bad payers) to protect themselves against bad debt.

Why incur costs when an infrastructure already exists within the private sector for hosting a register of credit agreements. Is it wise to ask the taxpayer to pay for an infrastructure to host credit agreements when one already exists? Also, why should there be different rules for the register and private credit bureaux, both are holding consumer credit information. If a consumer is prejudiced because of inaccurate data on a credit bureau that consumer can sue the credit bureau, if that same consumer is prejudiced because of inaccurate data on the register, the consumer cannot sue because the register is indemnified. Are we treating the same type of entity equally?

Proposed Data Protection Law:

Honourable members I think it is important for you to know that another proposed law emanating from the Dept. of Justice will also regulate all activities of credit bureaux. To prevent unnecessary overlap, conflict, duplication, ambiguity, and costs of transfer for both industry and government it must be properly addressed by both departments.

South Africa has a mature credit information system and in many respects the bill will enhance and improve the system, subject to the amendments sought. Further we should protect the infrastructure that exists in the private sector ensuring that it benefits people long marginalized and denied access to credit, and properly addresses the issues of the second economy.minimum", and that the Minister may prescribe a reasonable fee to be charged for credit reports provided to consumers and the Regulator

Credit information is used for monitoring of identity theft, fraud prevention, insurance risk, and even by government departments for tracing. These uses, are not provided for and are in the interests of the consumers, the public and, in line with international trends. The law should allow for additional uses of credit information under s68(1)(a), that are in the interest of consumers, the broader public interest and in line with international trends.

Free Credit Reports:

Credit bureaux support providing consumers with one free credit report per year. The only concern is an administrative one, worse case scenario all 18 million credit active consumers may request a free credit report in the first month of the act being passed, this will mean that the credit bureau would have to process 900000 requests per day. Best case scenario, even if a modest imillion consumers request their free credit report in the first month, the credit bureau would have to process 50000 per day. All that the industry is asking is that the law say "how" these are to be issued, for example date of birth basis like drivers licenses. You may also think of giving first preference in the first year to those vulnerable needy consumers who need it most, that is those denied access to credit on the basis of a credit report, if not they may have to wait their turn with other millions of consumers.

Technical Amendments:

I have provided you with a list of amendments sought by the industry, part B are technical amendments, we believe, that these are consistent with the intention of the lawmakers, we are merely suggesting the addition of certain words for greater legal certainty and no ambiguity.

We wish to submit that persons should not face criminal liability/imprisonment for commercial errors. So we are saying that the word "offence" in sections s70(6), 5 71(6),s 72(6), be changed to prohibited, which will mean a penalty of 10% of annual turnover instead of imprisonment. We don't believe that it is the intention of the lawmakers to impose criminal sanctions for commercial errors because this will deter commerce. We are also ask that prohibited conduct be properly defined, presently the bill defines it as any act or omission in contravention of the law, and allows the tribunal to impose 10% of annual turnover where it finds prohibited conduct, accordingly for a trivial contravention the tribunal will have the power to impose 10% of annual turnover as a fine. So section 151(a) should say that the Tribunal may impose up to a maximum of 10% of annual turnover, so the tribunal has the discretion to ensure that the tine fits the contravention.

We understand that this is well intentioned and is a way a giving consumers a chance to rehabilitate themselves, but do take a moment to consider unintended consequences, credit providers will the see the info as less reliable and incomplete, they will be unable to properly separate good payers from bad payers, and may increase prices for everyone (good payers and bad payers) to protect themselves against bad debt.

Why incur costs when an infrastructure already exists within the private sector for hosting a register of credit agreements. Is it wise to ask the taxpayer to pay for an infrastructure to host credit agreements when one already exists? Also, why should there be different rules for the register and private credit bureaux, both are holding consumer credit information. If a consumer is prejudiced because of inaccurate data on a credit bureau that consumer can sue the credit bureau, if that same consumer is prejudiced because of inaccurate data on the register, the consumer cannot sue because the register is indemnified. Are we treating the same type of entity equally?

Honourable members I think it is important for you to know that another proposed law emanating from the Dept. of Justice will also regulate all activities of credit bureaux. To prevent unnecessary overlap, conflict, duplication, ambiguity, and costs of transfer for both industry and government it must be properly addressed by both departments.

South Africa has a mature credit information system and in many respects the bill will enhance and improve the system, subject to the amendments sought. Further we should protect the infrastructure that exists in the private sector ensuring that it benefits people long marginalized and denied access to credit, and properly addresses the issues of the second economy.