Developing Credit Bureaus in South Africa, the importance of Consumer Education

1
Developing Credit Bureaus in South Africa, the
importance of Consumer Education

• Presented by
• Advocate Ashina Singh

2
CONTEXT

• Developing countries are faced with specific
  challenges which include, but are not limited to
• Eradication of poverty,
• The need for developing countries to be placed,
  individually and
• collectively on a path of sustainable
  growth and development, and
• The need to eliminate the marginalization of
  developing countries in
• the globalization process.
• Sustainable credit markets require well
  functioning credit information systems.
• Credit information systems can only be well
  functioning when the environment in which they
  exist is conducive to their operations.

3
ROLEPLAYERS IN THE CREDIT
INFORMATION SYSTEM

• The effectiveness of a credit information system
  is impacted by
• Government
• Credit providers
• Credit bureaux AND
• Consumers or data subjects.
• There is a need for all the constituencies and
  stakeholders referred to above to work together.

4
THE SOUTH AFRICAN CREDIT REPORTING ENVIRONMENT

• South Africa in particular has a sophisticated
  and evolved credit market supported by a
  sophisticated and evolved credit information
  system with the following characteristics
• competing private credit bureaux
• extensive voluntary sharing of positive and
  negative information
• among banks, retailers, telecommunications
  providers, and certain
• government departments within a closed user
  group of lenders
• c) sophisticated scoring and decisioning models
  and systems are
• used and
• d) data is retained for as long as it has
  predictive power.

5
THE SOUTH AFRICAN EXPERIENCE CONSUMER EDUCATION

• Notwithstanding the fact that South Africa has a
  sound credit information system many South
  African consumers have a negative perception of
  the credit information industry and credit
  bureaux.
• This negative perception includes the perception
  that credit bureaux blacklist black people
  thereby denying them access to credit.
• Consumer organisations, the Congress of South
  African Trade Unions, and the South African
  Communist Party, have place great pressure on
  government to
• Regulate the industry and
• As a once off exercise to remove all information
  from credit bureaux.

6

THE SOUTH AFRICAN EXPERIENCE CONSUMER EDUCATION
CONTINUED

• Government has responded by
• Regulating the entire range of credit bureaux
  operations
• Providing for the imposition of strict criminal
  penalties for contraventions in certain
  circumstances and
• Agreeing to a once off removal of certain
  categories of data from the credit bureaux
• Impact of the law and data removal exercise on
  the credit risk management system

7
2 VIEWS ON CONSUMER EDUCATION

• Inadequate consumer and public education programs
  has resulted in government interventions
• The nature of the business of a credit bureau
  will always make it unpopular with people whether
  there is education or not.
• Possible within the South African context- credit
  information system evolved rapidly, and consumers
  were in a sense left behind
• Irrespective consumers should be seen as an
  important stakeholder within the credit
  information industry

8
CONSUMER EDUCATION
IMPERATIVES

• Identify target markets and population segments
  to be
• educated and trained
• Coordinate initiatives on consumer education and
  training
• Design and develop appropriate educational and
  training
• material
• Launch educational and training programs
• The broader credit industry and government should
  be jointly responsible

9
CONCLUSION

• In addressing all aspects that impact a credit
  information system, including consumer education,
  a well functioning and sustainable credit
  information system is ensured.