BACKGROUND BUZZ PRESS RELEASE

February 2007

How does the latest National Credit Act affect South African recruiters?

The "National Credit Act No.34 of 2005" was passed into law by Parliament and signed by the President during March 2006, effective from 1 June 2007. This Act has many implications for South African recruiters using Credit Reports for screening purposes. Understanding those implications is key to utilising credit information.

1. What are the purposes of the NCA

In summary, the Act aims to protect consumers taking credit or entering into consumer credit transactions. In addition, it makes provision for the control and regulation of all credit transactions, including mortgages, credit cards, overdrafts, micro-loans and pawn broking transactions. It also provides for the following;

• Regulation of credit information
• Improved accessibility of the credit market to previously disadvantaged consumers
• Regulation of all credit lending activities
• Provides for debt reorganization in cases of over-indebtedness
• Establishes national norms and standards relating to consumer credit
• Enhanced consumer rights and education
• Promotes responsible borrowing and eliminates any reckless lending practices
• It readdresses the balance of power between consumers and credit providers
• Prohibits unfair credit and credit marketing practices

2. How will the Act be Regulated?

The NCA was instituted by the South African Department of Trade and Industry and will be enforced by specific role players and Consumer Credit Institutions, who have been given the power to perform acts in terms of the NCA, namely the: National Credit Regulator (NCR) & National Consumer Tribunal

3. Circumstances (as set out by the Act) under which one can obtain Credit Information on an individual

It is all good and well to understand the purposes of the Act and what it intends to achieve, but as recruiters and individuals using Credit Data for recruitment decisions, one needs to understand when one is allowed to request and use this data. According to the Act, Credit data can be obtained for the following purposes;

1. an investigation into fraud, corruption or theft, provided that the South African Police Service or any other statutory enforcement agency conducts such an investigation;
2. fraud detection and fraud prevention services;
3. considering a candidate for employment in a position that requires trust and honesty and entails the handling of cash or finances;
4. an assessment of the debtors book of a business for the purposes of

- the sale of the business or debtors book of that business; or

- any other transaction that is dependant upon determining the value of the business or debtors book of that business;

5. setting a limit of service provision in respect of any continuous service;
6. assessing an application for insurance;
7. verifying educational qualifications and employment;
8. obtaining consumer information to distribute unclaimed funds, including pension funds and insurance claims;

- tracing a consumer by a credit provider in respect of a credit agreement entered into between the consumer and the credit provider;

- developing a credit scoring system by a credit provider or credit bureau.

(Section 18(4) of the Regulations- The prescribed purposes, other than for purposes contemplated in the NCA, for which a report may be issued in terms of Section 70(2)(g) of the NCA)

Additional requirements

1. Any person who is the subject of a credit check needs to give Consent and Indemnity. Should a report be required for a purpose set out in Regulation 18(4)(C) or (E) to (G), the consent of the consumer must be obtained prior to the report being requested. (Section 18(5) of the Regulations). It is thus important to cover the following:

§ The candidate MUST be informed of the intention to perform the check;

§ MUST be informed as to the reasons for performing the check; and

§ MUST give you permission, at this stage in writing, to perform the credit check.

2. Application: A credit check can only be performed against the person if it is relevant to the position for which the person is applying. The law stipulates positions that require honesty and trust or deal with money. In this regard, the onus is on you to define and maintain this proof of relevance.

3. Transparency: The results of any credit check performed MUST be shared with the job applicant/ person checked. In addition, the person must be informed of the reasons, if any, of the consequences of a credit check.

In conclusion...

A number of entities have access to a consumer’s, or prospective consumers, confidential/ credit information. They include:

• Credit providers
• Debt counsellors
• Credit bureaus
• The Tribunal
• The National Credit Regulator (NCR)

When any of the above entities receive, compile, retain or report on a consumer’s confidential information, they must protect the confidentiality of the information. They may only use or report on a consumer’s confidential information if:

• The NCA or other legislation allows or requires it
• The consumer or prospective consumer consent to it
• A court order requires it

For more information on the Pre-Employment Screening, call Kirsten Halcrow, Managing Director of EMPS (PTY) LTD on (011) 678-0807/ kirstenh@emps.co.za. www.emps.co.za

…ENDS