Comment by the Credit Bureau Association (*A) with the endorsement of
The Consumer Credit Association and The Furniture Traders' Association (*B)
(*A - representing all credit bureaus in SA)
(*B - the two together representing 80% of the major credit retailers)
Introduction We wish to thank you for this further opportunity to comment on this important Bill. A number of practical suggestions in our previous submission (after the Bill was gazetted) have already been incorporated and this is most gratifying as they have taken account of the wide diversity and complexity of the credit granting industry.
The role of credit and of credit bureaus in South African society Many South Africans are not aware of the huge role credit plays in the country's economy and in assisting with the upliftment of living standards for all its people. A brief outline of this role - particularly in emerging economies - is attached at the end of this submission.
Oral and written comment on the Bill We wish to orally expand on this submission at any hearing you may hold. Please let us know the time and date. (Fax to c/o 021 8471634). Our joint written comment on specific sections of the Open Democracy Bill follows.
Section 1 (1)(viii) The definition of inaccurate includes the word "incomplete" which is too broad and is open to much interpretation. Probably more than half of all records in existence are incomplete in one form or another, mostly because it is not possible or not cost-efficient to complete them. Even a telephone directory is 'incomplete' as it abbreviates addresses. This has been recognised in both the Australian and New Zealand data principles where regard is taken of the nature of the information and its intended uses.
RECOMMENDATION
S.1.(1)(viii) - add the following words (line 18)
" . . . information contained therein and having regard to the purpose for which the record or information will be used or disclosed, means . . ."
Section 50(2)(d)(i)
The faxing or electronic mailing of 'certified' copies of identity documents is clearly open to forgery. However, the Bill states that access must be given if this subsection is complied
with, leading to information being given to the wrong person on occasion. It is therefore strongly recommended that discretion be allowed to avoid this.
RECOMMENDATION
S.50(2)(d)(i) - amend the wording (line 15)
" . . . or any other proof of his or her identity to the reasonable satisfaction of the head of the private body; and . . ."
Section 51(8)(c)
To keep the deleted part of a record for as long as the entire record itself is retained is impractical and wasteful. If a bank corrects an error on an account statement, it must make a copy of that statement. If the client maintains that account for the next 20 years, the bank will only keep a summarised record of that account (for instance when it was opened, how it has been conducted, etc). In terms of this subsection it must also keep
the copy of an erroneous statement corrected 20 years previously.
RECOMMENDATION
S.51(8)(c) - amend the wording (line 37)
"retain such copy for as long as the deleted information would have normally been retained."
Section 51(9)(a)
51.(9)(a)(iii) - If the request is four pages long this must be attached to the record. This is impractical and wasteful, and particularly if it has to be re-typed for computer storage.
RECOMMENDATION
S.51(9)(a) - delete (iii).
Amend the wording (line 47):
"and attach the request or a reasonable summary thereof to the record;"
Section 53(c) (Typographical)
RECOMMENDATION
53.(c) - The word "to" in line 44 should be "by", and reference to 56 should be deleted.
Section 55(h)
The manner in which this subsection is worded implies that regulations can be made which override subsections (a) to (g). Subsection (h), we submit, is in fact included to take account of any eventuality not covered by (a) to (g) and this should be made clear. In addition, we respectfully submit it is a fallacy that the average person places the right to absolute privacy above the desire to obtain goods, services, jobs, etc, and believe there is almost universal acceptance of some diminution of this right in these instances. The subsection should therefore be amended.
RECOMMENDATION
S.55(h) amend the wording (line 18) -
"for any other purpose which may be prescribed and which would not pose an unreasonable threat to privacy . . ."
Section 56(m)(i)
In terms of this subsection a governmental body can obtain information from another governmental body for the purpose of collecting a debt. No such provision exists for debts owing to private bodies. There should be no reason why governmental bodies are favoured in this way as debts in the private sector are larger and more numerous than in the governmental sector.
RECOMMENDATION
S.56 - include the same subsection [56(m)(i)] in section 55.
Section 57
This section imposes a subjective test which we believe is unfairly biased against private bodies. Anyone can claim he or she did not reasonably expect use or disclosure and it would be impossible to prove otherwise. We suggest that an objective test would be more equitable.
RECOMMENDATION
S.57 - amend the wording (line 33)
". . . only if the person could reasonably be regarded to have expected such a use or disclosure."
Section 58(1)(b)
This subsection provides for withdrawal of consent as prescribed. However, we believe the provision is open to serious abuse unless the regulations to be made always take this
possibility into account. For example, when opening an account a person gives the credit grantor consent to report the conduct of the account to a credit bureau. Whilst the payments are up to date the person does nothing but as soon as he or she falls into
arrears the consent is withdrawn. Application is then made for further credit at another institution in the knowledge that his or her non-payment may not be disclosed by the other creditor. The subsection should accordingly restrict the regulations to be made.
RECOMMENDATION
S. 58(1)(b) - add the following words (line 41)
" . . . consent as prescribed unless the person has a prior agreement to the contrary with the party concerned."
Section 59(2)
No provision is specifically made for those persons who refuse consent when the prescribed steps were taken to obtain it.
RECOMMENDATION
S.59(2) - add the following words (line 9)
". . . whether or not the person in fact gave consent unless the person had refused consent".
Section 59(4).
This subsection is to allow categories to be treated differently when making regulations. Under (2) "prescribed steps" must be taken to obtain consent, and these steps may well need to differ from industry to industry. We believe (2) was left out of (4) in error.
RECOMMENDATION
S.59(4) - add the following words (line 12)
". . .Regulations made for the purposes of subsection (1), (2) or (3) may -"
Section 86
This section affords persons (through the Human Rights Commission) and government (through the minister) the opportunity to consult when making regulations under the Bill.
The other party to the Bill, private bodies, have no similar opportunity and it is respectfully submitted this is inequitable. Furthermore, as we point out in our introduction, there are many complex data bases in many industries which require specialist knowledge and experience to understand. Without input from these institutions any regulation made could
be worthless in practice or even impossible to comply with.
RECOMMENDATION - 1
A new section should therefore be added to the Bill:
"The Minister of Justice shall appoint a private body consultative committee drawn from and reasonably representative of those private bodies which are subject to this Act, to advise in the making of the regulations in terms of section 86."
RECOMMENDATION - 2
S. 86 - add the following words (line 39)
". . .after consultation with the Human Rights Commission and where appropriate the private body consultative committee appointed in terms of section . . . and with the approval of parliament . . ."
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For general information:
Perceptions of credit bureaus We are aware of a negative perception about credit bureaus in certain quarters, which we believe is due to the misconception of their role in society. Bureaus in South Africa operate under a Business Practice Committee endorsed Code of Conduct, and
since its publication two years ago less than a dozen queries have been referred to the Credit Bureau Association by the BPC.
This is against a background of an industry which processes well over a million credit applications each month and holds over 12 million individual credit profile records.
Comparison with other countries The two largest consumer credit bureaus in this country have foreign parents (US & UK) - both of which operate globally. They use similar systems, safeguards and operational procedures, all of which are universally accepted.
Credit bureaus in emerging markets The necessity of a well developed credit bureau industry in emerging countries is demonstrated in the preamble to an invitation from the World Bank to the president of this
Association to address a credit conference in Argentina, from which we quote:
"Argentina and other countries in the region currently lack a well developed market for the collection, storage and exchange of personal credit histories . . . There is much anecdotal
evidence that some individuals and small businesses are deprived of credit and there is hard evidence that some who obtain credit must pay very high interest rates. Experience from other countries suggests that the restricted ability to obtain financing, especially for small businesses, consumer durables and mortgages, has reduced demand for these products and diminished growth in related sectors of the economy . . Well-developed markets for small business and consumer financial services rely heavily on detailed information about how borrowers handled credit in the past."
Our appeal South Africa's economy is largely driven by consumer demand. The vast majority of consumer items other than food are financed through credit. A million ordinary South Africans apply for credit every month to purchase the goods and services they need
to improve their living standards and run their businesses, and this is made possible only because of a well-developed credit information industry. Credit bureaus do not deny people credit, they ensure credit for those who deserve it.
Should any amendments to the tabled Bill result in bureaus being unable to operate efficiently - or at all, every single person in South Africa will suffer. Any changes made should be carefully weighed against the inevitable loss of access to credit facilities by many ordinary people - and the consequent effect on living standards and the economy.
The political and social consequences of a large percentage of the 50000 people who apply for credit every day possibly being turned away will need to be taken seriously into account.
ELKE DEUBLER (Ms)
President - Credit Bureau Association
7 August 1998