“Blacklisting” is an informal term that describes someone getting a tainted reputation as poor debt repayer. Poor debt repayers may be denied access to certain financial services.

Some financial experts have labelled the term “blacklisted” as outdated.

Since 2011, the National Credit Regulator has not included it in industry vocabulary. “Blacklisting” refers to a time when credit bureaus kept only negative or default data about the credit behaviours of consumers.

These days, the term “credit record” refers to someone’s payment profile (which includes positive data as well) and, accordingly, the credit benefits they qualify for; also known as their “creditworthiness”.

The National Credit Act provides for the making of negative and positive reports on each South African’s credit behaviours. With this information, credit records are compiled. Every person who has ever borrowed money or used credit has a credit record. Those with good credit records qualify for greater loans and credit spending limits. Those with bad credit records are seen as non-payment risks and denied access to certain financial services.

According to creditbureau.co.za, a credit bureau is a private company that gathers information on consumers and their credit histories. Well-known examples include TransUnion Credit Bureau (ITC Credit Bureau) and Compuscan Credit Bureau.

Credit bureaus get the information from credit providers and court judgements based on non-payment. They pass this frequently updated information on to credit providers. Examples of credit providers include banks and retailers that offer credit.

As stated previously, someone with a poor credit repayment record will have a reduced creditworthiness. This means that they will not qualify for large loans and may struggle to open accounts at credit providing retailers.

Cellphone banking apps generally offer a credit rating estimate on their mobile banking applications. For a more in-detail report, South Africans may access the website of any credit bureau once a year. Doing so as frequently as possible will keep you on top of it – although your credit record should not drop without you being in the know, it is not impossible.

Good communication with your credit providers is key, as is revising your budget and sticking to the changes.

Lockdown regulations determine that debt collection procedures and debt-related court processes are currently on hold.

Exceptions may apply to urgent legal applications.

Although the NCR’s offices are closed pending the lockdown, the entity has provided South Africans with valuable lockdown-specific advice via its website:

–                Communicate with your credit provider if you cannot make your full payment. Instead of not paying due instalments, speak to them about a possible credit term extension.

–              Those who cannot meet their monthly debt repayment goals may want to consider debt counselling or debt consolidation. (Debt counselling helps over-indebted consumers with budget advice, reduced payments and debt restructuring. With debt consolidations, your loans are combined and you pay one monthly instalment.)

–              Although the lockdown comes with a need for essential services, South Africans are advised to pay cash. This may necessitate revising your budget.

–              Try not to incur debt over the lockdown period.

–     Borrow as little money as possible.

–              Only borrow for what you really need.

–              Plan repayments before you apply for a credit card, store card, personal loan or overdraft.

–              When applying for credit, consider the interest and other charges as well as how this will affect your saving ability.

–      Elect the shortest repayment possible. The longer your payment term, the more you end up paying.

–              Credit insurance is important. Familiarise yourself with its terms to avoid surprises when you most need insurance.

The coronavirus pandemic has disrupted lives and damaged our economy. Its severity will continue to take a heavy toll in the weeks and months to come.” This statement by President Cyril Ramaphosa expresses South Africa’s economic reality amidst the Covid-19 pandemic. National Treasury projects a deep recession, followed by a slight upswing in 2021. Meanwhile, our country’s citizens face multiple hardships and fears, including the fear of going bankrupt.

“Bankrupt” is term colloquially used to describe someone who has more liabilities than assets. Legally, the processes of liquidation or sequestration give a status of diminished legal capacity to persons or entities who are unable to pay their debts. The former describes bankruptcy of a company and the latter is used with reference to a person’s estate only.

Liquidation and sequestration are always last resorts. Individuals and entities, who fear they might not be able to keep debt repayments up to date as a result of the Covid-19 related economic downturn, should know what their options are.

Individuals, who fear that their debts may overwhelm them, may visit a debt counsellor for debt review processes. This process was introduced by the National Credit Act to prevent consumers from being placed into personal administration and having to deal with the long term effects. It entails a debt counsellor assessing a client’s outstanding debt before implementing a restructured debt repayment plan. The idea is that an affordable monthly budget is drawn up to guide the client, including a single debt repayment amount made to an agency that distributes it to the creditors. If you are placed in debt review, you will be listed on the credit bureau’s records and will not be able to apply for credit.

Businesses in distress must do whatever they can to restructure and restore liquidity. In so doing, liquidation can be avoided.

If a business manages to preserve and have access to the minimum capital it needs to stay afloat, it could save itself. One option is to tighten the reins on financial management. In order to get access to more capital, a business may seek additional investor funding. Alternatively, a non-core part of a business may be liquidated in order to keep operations moving.

Another option entails revising and possibly shuffling or replacing management roles. This is a difficult task and often includes having to make difficult decisions. However, if having the right people in the right positions is what could save a company, it has to be done.