What does it mean to be blacklisted in South Africa?

These days in South Africa, most people are under some form of financial stress. You may even have fallen behind on some of your credit payments and tried to open up an account at a clothing store and found out that you are now blacklisted. If you are blacklisted, then the chances that a credit provider will extend you further credit is highly unlikely. their basic reason for rejecting your credit application is that if you were unable to pay your previous debts, what guarantee is there you will be able to service this new debt if it is granted, you are what the credit provider would consider high risk and unless you get your credit history back on track you will keep struggling to get a decent paying job and any sort of future credit.

The term blacklisted is quite general and can apply to a number of situations a credit consumer would find themselves in. It could be related to having an account in arrears or possibly having a judgment against you.

What is very important for the consumer who has been blacklisted to understand is that even if you settle your outstanding debts, your credit profile is tainted with the blacklisting for at least two years in some particular cases as long as five years.

What does it mean to be in Arrears?

If you have failed to make scheduled payments and fallen behind, then your credit record will show this, but no legal action has been taken yet. At this stage, you are able to approach your credit provider and make an arrangement to settle the debt and catch up on back payments. Usually, you will have to pay some sort of administrative “fine” but it's worth it.

If you are really sinking under debt and have a number of accounts in arrears, then it would be in your interest to contact the National Debt Mediation Association, a non-profit organization that can assist you with negotiating terms of the settlement with your existing creditors.

If you have fallen into arrears with a large asset such as a car or house, then approaching a registered debt counselor would be smart as they can then assist in protecting your assets from seizure.

What is very important to bear in mind, is that even if you manage to pay off your debt after falling into arrears, your record will reflect the adverse information for a period of five years. What this means for the consumer applying for credit in future is that they may be seen by the credit provider as being high risk and therefore be subject to higher interest rates or stricter payment terms. Generally, a person with an adverse on their credit profile will struggle to get credit over someone who does not have one.

What does Default mean?

When your credit profile reflects you are in default, this will usually mean that your debt has been handed over to attorneys. What will be visible on your credit report is that the debt in question has been “handed over” or “written off”.

If you have a debt written off, it is usually due to the fact that the creditor feels the chances of recovery are low or the costs of recovery too high, either way, the debt is written off and this is visible on your credit report for a period of two years.

What is important to realize, if you are still being contacted by debt collectors either in person or via telephone, you still have time and an opportunity to negotiate terms to have the outstanding debt paid off. What is vital to realize, at this point, it is still not too late to turn things around and we advise that you immediately attempt to enter into an agreement to settle the outstanding debt.

At this stage in the collection process, outside parties who have been contracted by the creditor to collect the debt are expecting some form of payment too. The creditor will usually expect the full outstanding amount to be paid, however realistically they will understand that you are a distressed client and, in most cases, if you can offer to settle the outstanding principle debt, all additional fees, and interest can be negotiated away. However, the credit provider is not under any obligation to negotiate but it is worth asking for.

You should also find out if the principle debt is still with the credit provider you originally contracted with or whether the credit provider has on sold the debt to a debt collection agency. If the debt has been on sold and is now sitting “owned” by a debt collection agency, then they are looking at a quick settlement and will most likely be flexible and open to settlement options from yourself. Once again, if you do not ask, then you will never find out if settlement terms are on the table.

If you manage to settle the debt, then your credit record will reflect that the debt has been settled in full, but the adverse information will remain for a period of two years. When you settle the debt with either the original creditor or the debt collection agency, ask them for a paid-up letter, which you need to submit to the credit bureaus for processing so they can update your profile. The law stipulates that they have 20 days to process and update their records and you have a right to request a copy of your record to reflect that “paid up” is reflected against the debt in question.

What is a Judgment?

Next, we shall discuss what is a judgment. A judgment is very serious as it is a legal action and it is difficult to reverse.

A judgment of a high court cannot be rescinded or removed unless it was issued in error. A high court judgment is usually for amounts in excess of R 100 000. For amounts less than R 100 000, judgments are usually issued by the magistrates' court and these can be rescinded if you pay off the debt.

Once again even if you pay off the debt after judgment, the record will show on your credit profile for up to five years and be reflected as paid up.

Credit providers will see a judgment as very high risk and your chances of getting future credit after one has been issued are highly unlikely.

In order to have a magistrate's court, rescind a judgment against you, you need to not only produce a paid-up letter from either the original credit provider, but you will also need a letter from the credit provider stating that they agree to your judgment being rescinded.

Credit providers are not legally obliged to provide you with a letter consenting to you having a judgment expunged from your profile. In most of these circumstances, credit providers will refuse to provide this letter. However, it is worth asking for.

If you manage to get the judgment rescinded, then it will remain on your record for a period of five years, and the action will state that it has been rescinded.

If you have an outstanding judgment, then it will be removed from your credit profile after five years, however, it will remain active for a period of thirty years. These thirty years of activity means that a credit provider, in essence, can hold you liable for your debt for a period of thirty years!

So, bear in mind that many years may have passed since you last heard from someone demanding the debt to paid, however the whole-time interest has been added to the account, suddenly you are stuck with double the amount of the original debt. So, understanding that if you have a judgment, do not think that it will suddenly go away.