By: Nicola Mawson
As many as 60% of all the complaints that end up at the Credit Division at the National Financial Ombud Scheme South Africa (NFO) are found in favour of the consumer, a higher percentage than at other of the Office’s entities.
That, Howard Gabriels, the lead ombud for the Credit Division at the NFO explained, is largely because of incorrect listings at one of the credit bureaus. "A significant number of those complaints were that I was wrongly listed in the credit bureau. And normally, when a consumer claims they were wrongly listed, there is something wrong". So, it’s not surprising that in credit reporting, the number of disputes is higher said Gabriels commenting on the fact that – on a broader scale – between 35% and 40% of claims at the NFO are resolved in the consumer’s favour.
Gabriels was speaking with Personal Finance following the news that, since its launch in March, the NFO has recouped more than R161 million for consumers. “It's actually quite a significant amount because we always say that this amount would not have been given back to the consumer if it was not for our intervention,” he said.
The NFO is an independent body that resolves complaints brought by consumers against South African financial institutions and is made up of four former longstanding industry ombud schemes: the Ombudsman for Short-Term Insurance, the Ombudsman for Life Insurance, and the Credit Ombud and Ombudsman for Banking Services.
Real-life situations Gabriels’ office has encountered include situations in which an account had been closed after it had been paid up yet was still listed as active on a credit profile.
Gabriels explained that, in these situations, consumers would be declined for a home, car, or revolving loan and would then seek to have the error rectified on their report. “Often consumers discover information on their profiles that is inaccurate when they want to apply for a loan,” said Gabriels.
The NFO, he said, assists with this by aiding the consumer in acquiring a paid-up letter from a credit provider, or advising them on how to prove the account was settled through, for example, collating proof of payments for submission.
Gabriels said that once an account – for example with a clothing retailer – is paid up, consumers should be asking for it to be closed and to get a letter to that effect. Without these steps, he explained, an account could continue attracting administrative fees.
Other real-life examples Gabriels said the office has intervened with include ones in which a consumer was wrongly charged for something, such as a duplicate charge going through the point-of-sale or being charged the incorrect interest rate.
Fraud is an ongoing concern, said Gabriels, and will adversely affect someone’s credit record. Most cases, he explained, result in items being purchased for against a genuine ID number, with delivery for the fraudster’s address, and no payment being made.
The set process to follow here when this is discovered is to lodge a case with the South African Police Station, after which the NFO would investigate and engage with the credit provider to ensure that the amount claimed is written off, Gabriels said. It would then be up to the credit provider to resolve the issue, he added. “We really encourage people that, if they suspect any fraud, they contact us so that we can assist them to follow the right process,” he said.
Among other issues the Ombud has dealt with include an amount having been written off and then collected against and debt that has prescribed. In terms of prescription, this can be raised as a defence against debt collection if:
- The credit provider has not acted against the consumer for at least three years
- The consumer has not acknowledged the debt in that period, and
- The consumer has not made any payment against the debt for at least three years
In these circumstances, Gabriels said, the consumer can argue that the debt has been prescribed and, therefore, should be written off. When the matter has dragged on to the point that it is with debt collectors, the NFO is also able to assist when the collector is a member of its office, he said.
It is important, however, to note that debt could have been on-sold to a third-party collector, in which case the Ombud has no jurisdiction, Gabriels said.
While there are still some cases of reckless lending, this has diminished dramatically since the establishment of the National Credit Act (NCA) with lenders implementing the required affordability test, said Gabriels.
“We do have a few cases in reckless lending that go in favour of the consumer, but it's a very small number. We are finding more and more, even the smaller micro-lenders, they're following the requirements of the regulations on reckless lending,” he said.
In some cases, the Ombud has aided in enabling consumers to enter payment arrangements.
To ensure that credit reports are accurate and complete, Gabriels encouraged credit users to take advantage of the fact that, in terms of the NCA, they can get one free report a year.
South Africa’s main credit bureaux are:
Experian
TransUnion
Compuscan
XDS
“It is a question of knowing your rights. And often consumers don't know their rights,” said Gabriels.
PERSONAL FINANCE