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Alternative Dispute Resolution

Alternative Dispute Resolution

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Alternative Dispute Resolution

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  1. Alternative Dispute Resolution South African Perspective Cynthia Matshiakgotshi Head Of Department – Credit Information

  2. Contents • What is alternative dispute resolution • Ombudsman in South Africa • Difference between ADR and litigation • National Credit Act • Credit bureaux

  3. Contents Continued • Launch of Credit Information Ombud and name change • Advantages of ADR • Challenges within the credit industry • Current public perception • Conclusion and recommendation

  4. What is Alternative Dispute Resolution • Informal process • Common factors • Alternative to litigation • No regulating authority

  5. Other Ombudsman/ ADR • Voluntary Ombud Schemes • Credit Ombud • Short term and Long Term Insurance • Ombudsman for Banking services • Statutory Ombud Schemes • Provident Fund Adjudicator • Financial Service Providers (FAIS) • Other Industries Ombud Offices - Motor industry, Dental, Press and Consumer Goods

  6. Difference: ADR and Litigation • Litigation • Public process • Formal and technical • External rules • Execution of judgment • Command process (court orders) • Alternative dispute resolution • Private process • Informal process • Internal rules • Consensual process

  7. National Credit Act • National Credit Act 34 of 2005 • Applicable provisions to ADR • Section 134 • Section 129 • Proposed amendments • NCA amendment bill – 29 Mei 2013 • Regulation of ADR

  8. National Credit Act • All credit transactions which are undertaken in South Africa are bound by the National Credit Act 34 of 2005 (NCA) • The NCA was designed to: • Protect the consumer • Promote a fair, transparent and accessible credit market and industry • Promote and advance the social and economic welfare of South Africans

  9. Credit Bureaux: Information Sharing • Credit Bureaux • Registered credit bureaux • Sources of information • Who is listed at the credit bureaux • Type of information listed • Credit Bureau Association • Responsibilities

  10. Main Credit Bureaux • Transunion • Experian • XDS • Compuscan • Regulating authority • Credit information reporting is regulated • National Credit Regulator

  11. Role of Credit Bureaux • Custodian of data • ID numbers, names and surnames, contact details, court orders, payment profile, trace alert, enquiries, employment details etc. • Provider of data • Negative and positive credit information • Obligation of the credit bureaux • Verification of data • Protection of data

  12. Advantages of Information Sharing • Credit and service providers • Easy access to credit information • Better credit assessment • Minimising bad debts • Consumers • Improved access to credit • Prevent over-indebtedness • Encourage positive payment behaviour

  13. Benefits of Credit report • Level of analytical skills available in credit provider • Extent of utilisation of credit report Low = 5% and High = greater than 5% Where an institution has capability to utilise credit reports in credit decisions, credit reports provide significant value towards making good credit judgements. In such instances, credit reports provide a major contribution in risk management

  14. World Bank’s 2012 Rating of South Africa • South Africa has a sophisticated credit bureaux system • We were nominated as of the best in the world by World Bank in terms of ease of getting access to credit based on the strength of legal rights and the depth of credit information

  15. Consumer Rights • Receive credit report • Free of charge • Minimum fee of R20.00 • To challenge the accuracy of the information • Credible evidence or • Removal of the listing • To redress • To reason why credit application is declined

  16. Consumer Perception: Pre 2004 • ‘Black listing’ of consumers • Lack of confidence in the dispute process • Threat to close the credit bureaux • Violation of consumer rights • Privacy • Credit bureaux are biased • Credit bureaux are responsible for declining credit applications (misconception)

  17. Government Perception: Pre 2004 • Government considered closing the credit bureaux because they were viewed as the possible contributing factors to the deteriorating economy based on the following: • Incorrect or incomplete credit information • Lack of accountability between the credit bureaux and subscribers

  18. Government Perception: Pre 2004 • No regulating authority • Mismatch of credit information • Identity numbers • Name and surnames

  19. Creation of Credit Information Ombud • Consultation by the relevant credit industry stakeholders (credit bureaux, credit providers and independent members) • CIO launched 21 March 2004 • prior to the National credit Act 34 of 2005 • Registered with Financial Services Ombud Schemes Act

  20. Creation of Credit Information Ombud • Reporting structure • Credit Ombud Council • Consumer bodies, the credit providers, credit bureaus and independent members

  21. Change of Name • 2009 - Gap in the market identified • Extended jurisdiction • Non-bank credit disputes • Name changed to Credit Ombud

  22. Responsibilities of Credit Ombud • Resolve credit bureaux related disputes • Consumer education and awareness • Afford consumers opportunity to redress • Disputes are logged: • Via internet, telephonically, by fax or in person • To promote responsible credit information reporting (credit bureaux and subscribers)

  23. Credit Ombud Jurisdiction • Credit Information Department • Inaccurate or incorrect credit information; • Insufficient or incomplete credit information; • Out-dated credit information • No fault default • Prescribed debt • Double listing • Identity fraud • Service disputes

  24. Credit Ombud Jurisdiction • Non-bank Credit Department • (a) Where the member breached any relevant laws or regulations • (b) Breached an applicable code of practice or code of conduct provided for by relevant legislation, regulations or by-laws • (c) Not met standards of good practice • (d) Acted unfairly and/or unconscionable towards a complainant

  25. Key Figures • Complaints and enquiries received • Calls received by the Credit Ombud call centre • Disputes opened by the Credit Ombud • Disputes close d by the Credit Ombud • Average days to resolve a dispute • Percentage of disputes resolve d in favour of consumers • Amount recovered for complainants

  26. Key Figures • Media Equivalent Advertising Value • Workshops • Cost per dispute • Total expenses for the year

  27. Method Used To Achieve Goals • Effective disputes resolution processes • Paperless complaint system • All in writing / record • Values • Fairness, independence, honesty • Manner of finalization • Facilitation, recommendation, mediation and ruling • Our decision is binding on members, but not on consumers

  28. Methods Used To Achieve Our Goals • Consumer education and awareness • Workshops • Electronic and print media • Credit bureaux • Credit / service providers • Referrals

  29. Dispute Process

  30. Funding Model • Funding • Office funded by credit industry • Non profit • Free to consumers

  31. Advantages of ADR • Advantages of ADR • Cost saving • Speed • Efficiency • flexibility • Informal

  32. Challenges • Credit Industry • Identity theft • Protection of personal information • Credit or service providers • Bad debts due to fraud • Unsecured lending

  33. Challenges • Credit Ombud • Lack of responses from service/credit providers • Delayed responses from service / credit providers • Third parties who are charging consumers for our free services • Awareness • Lack of branches

  34. Current Public Perception • Although credit information rating by the World bank was good, there is still a negative perception about credit bureaux • Negative credit information is still being viewed as hampering the growth of our economy • The above may be due to insufficient consumer awareness and education about the credit bureaux

  35. Conclusion and Recommendations • Apart from the challenges and Co experience ADR is effective in resolving credit bureau and credit related disputes • What is required for effective ADR process: • Communication

  36. Conclusion and Recommendations • Consultation with the relevant stakeholders • Get buy in • Clear dispute process • Effective case management procedures and timelines • Clear policies • Staff (legal and credit background, analytical skills) • Ongoing consumer awareness and education!

  37. Thank you!