Although not defined in the National Credit Act 34 of 2005 (the Act), nor in the Regulations thereto, “blacklisting” is a far too familiar concept to most South African consumers and businesses. “Blacklisting” can be defined as the submission of negative payment information to a registered credit bureau. (LS Crawford v JD Group Limited 2015)
Businesses frequently threaten their consumers who fail to pay their debts on time with “blacklisting”, but how can a business legally “blacklist” a consumer?
According to the Act, a registered credit bureau must accept consumer credit information, positive or negative, from any credit providers and from any other prescribed person. Prescribed persons include any person who supplies goods, services or utilities to consumers, whether for cash or credit. Credit providers are not only institutions that provide credit in the traditional sense of the word, but also normal businesses that conclude “incidental credit agreements”, “discount transactions” and other forms of credit agreements. This means that most businesses will fall into one of these categories and have the ability to “blacklist” consumers.
An incidental credit agreement is an agreement, in terms of which an account was tendered for goods or services that have been provided to the consumer or are still to be provided over a period of time and either a fee, charge or interest becomes payable when an account is not paid in time and/or where two prices were quoted for the settlement of the account, the lower price being applicable if the account is paid by a certain date, and the higher being applicable if the account is not settled by that date. The parties to an incidental credit agreement are deemed to have entered into the agreement 20 business-days after the supplier of the goods or services charges a late payment fee or interest, or the pre-determined higher price for full settlement becomes applicable, unless settled before that date. In basic terms, this type of agreement is where a consumer will have to settle his debt on or before the payment date, failing which, a fee or interest will be levied as a result of the late payment. For example, A cell phone company enters into a contract with a consumer. The company provides services over a period of time and the consumer received monthly statements. The agreement provides that, if the amount debited to the account is not paid within 30 days from the date of the account, interest will be charged on the account.
This differs from a discount transaction, which is an agreement in terms of which goods or services are to be provided over a period of time and more than one price is quoted, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable if the price is paid after that date. Although similar concepts, the difference is that with an incidental credit agreement, the outstanding amount has already become due, owing and payable due to the fact that the payment date has passed. This failure to pay in time will result in a fee, charge or interest being levied, as in the cell phone company example. Whereas with a discount transaction, the failure to pay the discounted price will not result in a fee, charge or interest being levied as the payment date has not yet passed and the consumer is not in default.
However, it is important to note that those who conclude an incidental credit agreement, discount transaction or other forms of credit agreements with a consumer will be considered to be a credit provider by the Act, allowing them to provide consumer information to credit bureaus.
A business that is either a credit provider or prescribed person must give at least 20 business days-notice to the consumer of their intention to submit adverse consumer information, which includes classifications such as “slow-paying”, “default” or “not-contactable”. This notice, on its own, should be very effective and persuade the consumer to settle their debts promptly, in order to avoid being prejudiced by this black mark against their name.
Only once notice of intention of listing has been given and the notice period expires, may the credit provider or prescribed person submit this information to a registered credit bureau. There are four main credit bureaus in South Africa, namely Experian, TransUnion, Compuscan and XDS. Three out of the four institutions require a subscription fee in order to make use of their services, which include the recording of consumer information. This may be very useful when it comes to dealing with difficult customers. However, in the event that “blacklisting” the consumer is not enough to bring about payment, legal advice may always be sought in order to recover the money that is owed to you. This process would usually begin with a Letter of Demand being sent, followed by the service of a summons.