We have all heard the dreadful term – You will be blacklisted… What does it mean to be blacklisted in South Africa?
In the present harsh realities of the economic climate in South Africa, many citizens are facing severe financial disstress, inter alia, defaulting on credit payments, and upon attempting to open a credit account at your favourite retail store, you are informed that your application has failed as you are blacklisted!
Being blacklisted was in full force and effect approximately 30 years ago, when a debtor only had a credit record once the debtor was under administration, declared insolvent or had judgments against him/her. Today the term is used loosely to describe a debtor’s inability to meet his financial obligations to his creditors, and is blacklisted on database systems by a click of a button following receipt of a letter of demand from his creditor.
What is the actual meaning of the term – “blacklisted” in South Africa?
If you are blacklisted, your prospects of success in obtaining credit from any credit provider, is slim to none. The balance of convenience favors their contention of your inability to pay historic debts, guarantees your inability to pay future debts. You would be considered a high risk credit consumer, and your credit score would be less than the required minimum score.
The term blacklisted is quite general and can apply to a number of situations a credit consumer would find themselves in, inter alia, an account that is in arrears, a letter of demand for outstanding debts or possibly a judgment having been granted against you.
What is very important for the consumer who has been blacklisted to understand is that despite settling your outstanding debts, your credit profile is tainted with the blacklisting for at least two (2) to five (5) years.
I am in Arrears with my accounts.. What do I need to know?
Take note that should you have failed to make scheduled payments and fallen behind continuously, then in that event, your credit record will reflect a low scoring, to your detriment.
Should your outstanding debt not be a subject matter of legal action at this point, it would be reasonable to suggest that you approach your credit provider and enter into payment arrangements to settle the debt immediately.
In the event that your liabilities have accrued to such an extent, that you are unable to meet any of your financial obligations, it would be in your best interest to contact the National Debt Mediation Association (NDMA), a non-profit organization that will be in a position to assist you to arriving at a negotiated settlement of your debts with your existing creditors.
In addition, you may seek the intervention of a duly registered Debt Counsellor to assist you in reaching a compromise with your creditors and protecting your assets from seizure by way of the judicial process.
You have been listed as a Default Payer! What does that mean for you?
When your credit profile reflects that you are in Default, this will usually mean that your debt has been handed over to a firm of attorneys. Your credit profile will in the normal course, reflect 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 prospects of success in recovering the debt may exceed the actual debt amount. Alternatively, the costs of recovery thereof would be too high. Either way, the debt is written off and this is visible on your credit report for a period of two (2) to five (5) years.
It is noteworthy to mention that 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 is that it is still not too late to employ a turnaround strategy and in this regard, we advise that you immediately attempt to enter into an agreement to settle the outstanding debt.
Following settlement of a debt, it is imperative that you ask and obtain a Paid Up Letter, which must be submitted to the Credit Bureaus across the Republic of South Africa, for processing so they can update your profile accordingly.
The law stipulates that they have a period of 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.
A Judgment has been obtained against me! What is a Judgment and What Do I Do?
A judgment is a very serious step taken against you, as it forms the subject matter of litigation instituted against you and can be a difficult task to have such removed.
A High Court judgment cannot be rescinded or removed unless it was issued in error. A High Court Judgment is usually for amounts exceeding R 300 000. For all amounts less than R 300 000, Judgments are usually issued by the Magistrates’ Court and such a judgment may be rescinded once the debt has been settled in full.
We reiterate that credit providers see judgments as extreme high risk and your chances of obtaining future credit successfully after one has been issued, are highly unlikely.
In order to have a Magistrates Court, rescind a Judgment against you, you are required to not only produce a paid up letter from the credit provider, but you will also require a letter from the credit provider stating that they consent to the Judgment being rescinded.
It must be noted that 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 and an application must be instituted, seeking the Court’s directive in the rescission application.
Should you succeed in having the judgment rescinded, then it will remain on your record for a period of five (5) years, and the action will state that it has been duly rescinded.
If you have an outstanding judgment, then it will be removed from your credit profile after five (5) years, however, it will remain active for a period of thirty
(30) years. This thirty (30) years of activity means that a credit provider, in essence, can hold you liable for your debt for a period of thirty (3) years!
So, bear in mind that many years may have passed since you last heard from someone demanding the debt to pay. However, interest has accrued on your account for all that time and suddenly, you are stuck with double the amount of the original debt. So, understand that if you have a judgment, it is not so easy for it to disappear.
Prevention is Better than Cure!
Monitoring your finances with a budget, will help you predict if you might default on payments or are unable to maintain your financial obligations. Communication is key to avoid having your finances and your life spiralling out of control. Maintain contact with your credit providers and inform them of any changes that affect your agreement.
Most people get labelled as blacklisted, because they failed to make contact with their creditors and ignored communication from debt collectors.
Avoid being Blacklisted!
If you’re feeling overwhelmed by your current financial situation, feel free to contact us.
We are in a position to assist you in respect of Financial Debt Restructuring, as well as protecting your interests in the event of any legal proceedings against you.