What does being blacklisted mean?

Have you tried to get a loan for your dream house, or even to buy that car you have always wanted, but are constantly declined? Could you possibly be blacklisted?

Moneybags journalist, Ashleigh Brown, looks at what blacklisting is, how it works, and how you can clear your name.

The term ‘blacklist’ is misleading, according to ITC Clearance. It was used when credit bureaus would only keep negative information about consumers.

“The term evolved from the actual meaning of blacklist which may be a list of people, a product, companies, countries, etc. who are considered by risk, not to be trusted or unacceptable to another group,” says Edgar Watkins, from ITC Clearance.

Since the 1980’s, following international trends, credit grantors are now encouraged to also share positive information about their customers, as this facilitates access to credit, explains ITC Clearance.

“The perception that a credit bureau only keeps negative data is not true. For example, about 60% of the information held by a credit bureau is positive information,” says ITC Clearance.

The Credit Ombud adds that you cannot be blacklisted, but can be part of the 40% who have a negative notation.

Submitting info to credit providers 

The Credit Bureau Association (CBA) explains that when you enter into an agreement for goods or services you give permission for the provider to submit your information to the credit bureaus.

“The credit bureaus also hold public information, such as if a judgement has been obtained against you in a court for bad credit payment. This information normally comes from the court,” says the CBA.

Due to the Credit Amnesty, consumers will no longer have to worry about having their name on the debtors list for a number of years after they have finished their repayments.

“In terms of the NCA, credit providers must submit to all registered credit bureaus within seven days after a consumer has paid in full information regarding such settlement. Credit bureaus are required to remove adverse credit information relating to a debt that has been paid in full within seven days after receiving such information from the credit provider,” says Theunis Kruger the head of Unsecured Lending at Standard Bank.

There are different terms which are used, depending on if there has been action taken against you, if you are behind on payments, or have stopped paying all together.

Arrears and default listings

“In the credit agreement it states that an instalment or amount of money needs to be paid by a certain date each month, and if the debtor does not settle accordingly, that debtor is in arrears and potentially in breach of the agreement,” explains Watkins.

You can approach your credit provider, explains I-Check Data Solutions (ICDS), and make arrangements with them.

However, if you have fallen behind with multiple payments, then you could seek out the advice of a debt counsellor or finanical advisor, in order to find a payment option that will be best for you.

Justmoney has a guide on what a debt counsellor is, and how the process works, click here.

A default on your credit record means that your debt has been handed over to the attorneys.

“What will be visible on your credit report is that the debt in question has been “handed over” or “written off”,” said ICDS.

Laws to protect the consumer

Watkins explains that the National Credit Act (NCA) is there to protect you, as the consumer, and also to protect the credit bureaus. Both of you need to be responsible when it comes to your money, and your credit record.

He highlighted that the NCA 34 of 2005 states the purpose of the act is “to promote a fair and non-discriminatory marketplace for access to consumer credit, and for that purpose to provide for the general regulation of consumer credit, and improved standards of consumer information.”

However, the act also states that credit providers should grant credit responsibly, and prohibit reckless credit granting.

“In terms of the NCA, they must do a proper affordability assessment before they can give you any credit, assessing how much you owe to who, and how well you keep up with those payments. Your credit report helps them to do this,” says the CBA.

The full NCA 34 of 2005 can be found here.

Credit reports

You need to phone the relevant credit bureau, like TransUnion, and ask for a copy of your bureau report.

As per the National Credit Act, you are entitled to one free credit report per year. If you want another report within the same year, you need to pay an administration fee of approximately R20 per credit report, according to the Credit Ombud.

Tips for consumers 

Kruger has tips for consumers on how to lend responsibly, and avoid adverse listings with credit providers.

  • Finances: You need to be completely aware of your finances. “Most consumers do not have a clear view of their outgoings and often end up over-committing themselves as a result. Knowing where your money is going enables a consumer to take control of their financial future,” says Kruger.
  • Interest rates: Kruger says that consumers need to understand how interest rates works, and what interest they will be paying on their loans. “It is normally, but not always, stated in terms of an annual interest rate. Make sure you understand exactly what your interest rate is and how you are being charged the interest,” says Kruger.
  • Repayment periods. Kruger explains that this is the amount of time you have in which to pay off the debt. “The shorter the repayment period, the less you will ultimately end up paying in interest but the more you will have to pay on a monthly basis,” says Kruger. He went on to say that depending on your affordability, you should opt for higher payments and a shorter repayment period on the loan if it is an option. This is because it will help you to save money in the long run.
  • Go to your bank for help: “If you do need credit to make that big purchase, it’s better to approach your bank. Banks will first conduct an affordability test to see if you can afford the repayments,” says Kruger. If after the affordability test, your request is declined, then you really cannot afford the item.
  • Communication: “Communicate with your creditors if you are struggling to make your monthly repayments. If you are experiencing financial difficulties, immediately communicate with all your creditors, rather than ignoring the problem – it won’t go away! Most credit providers would rather have you paying back a reduced amount over a longer period than having to blacklist you,” says Kruger.
  • Maintain a good credit profile: Kruger says that you can build a good credit profile by using credit wisely. This means not borrowing too much money and always paying back your debts on time. “The better your credit record, the more lenders will be willing to lend you money at reasonable terms i.e. lower interest rates,” says Kruger.

 

*This article has been updated. Previously it stated that a consumers name would remain on the debtors list for up to two years after all their payments had been made.