Publications
Partners
Fraudsters can now be blacklisted with credit bureaus for a period of 10 years, and not just one year, the Supreme Court of Appeal (SCA) ruled earlier this month.
The judgment comes after a court battle between the National Credit Regulator (NCR) and the Southern African Fraud Prevention Service (SAFPS), which has dragged on for several years.
The SAFPS maintains a database of swindlers who have defrauded banks, retailers and insurance companies.
The NCR had argued that this information constitutes “credit information”, which, according to the National Credit Act, may only reflect on a person’s credit record for one year.
But the SAFPS maintained there was a significant difference between information that a person, for example, had not paid their clothing account, and information to the effect that a person had behaved fraudulently.
The court battle began about three years ago and turned before a full bench of judges in the high court, who found in favour of the SAFPS.
The NCR appealed that decision before the SCA, which it has lost.
The SAFPS, a nonprofit organisation that helps companies in the credit provision industry to avoid falling victim to fraudsters, was established in 2001.
It operates the Shamwari database, which allows for confirmed cases of fraud to be recorded so that the information can be shared.
Clients of the SAFPS include banks, retailers, vehicle financiers, cellphone companies and certain insurance companies, as well as the SA Revenue Service.
The NCR argued that the information stored on the Shamwari database was a consumer’s credit information, and that keeping it for so long constituted a contravention of the National Credit Act.
The SAFPS disagreed, and argued that fraudsters were mostly repeat offenders who approached various credit providers and often also employed a variety of fraudulent methods, so the information was relevant for a long period of time.
The appeal court ruled that, by making rules that prevented consumers from being blacklisted indefinitely applicable to cases of fraud, the financial sector’s ability to protect itself from fraud would be undermined.
In addition, it would have the effect of protecting fraudsters, not their victims.
According to the judgment, doing so would not be in the interest of furthering a responsible credit market, and would fail to protect consumers.
Manie van Schalkwyk, the CEO of the SAFPS, said that the NCR’s interpretation of the law was unsustainable.
He said it made no sense that a fraudster could start again with a clean slate after a year, while the data of people who had been declared insolvent could be kept by a credit bureau for 10 years.
Van Schalkwyk said the SAFPS had protected its clients from fraud to the tune of at least R2 billion in 2017.
This amount is sourced from information from clients who would have opened accounts or extended credit to certain people, but did not do so because of the SAFPS’s database.
