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UNDERSTANDING THE PATH TO PURCHASE
2022 Global Consumer Types
HOW TO TARGET THE RIGHT CONSUMERS
Demographics shouldn’t be your sole directive when analysing shopping behaviour and purchase decisions. This information alone will give you a skewed view of daily habits and long-term lifestyle choices.
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One of the great advantages of the computer is that it provides such easy access to data, through powerful search facilities, ease of communication, and sophisticated analysis capabilities. When the data is sensitive and personal, however, this can lead to serious abuse, because it opens the way for the data to be used for purposes quite different from its intended use. This can happen for a number of reasons and we need to guard against it.
The rules governing who can use the data and for what purpose may not be clear or restrictive enough to protect the intentions and interests of the Data Subjects (you and me), or those who control the data (the Responsible Party) may not enforce the rules. Or the Responsible Party may not have sufficient control over who accesses the data. Whatever the reason, this can lead to severe problems. What characterises all of the situations, is that Personal Data is used for purposes other than those for which it was intended. This is a serious attack on the autonomy and dignity of the individual Data Subject.
If someone reveals Personal Information of him/herself, or a reference to a close relation, as part of an application for a credit card, it is because the person decides it is worth the benefit, and because the person is establishing a relationship of mutual trust with the credit provider. It should be the same with an online retailer, email provider, search service, or social network. If the holders of the information provide it to an employer, or sell it to a marketer, without authorization, they are violating the intent of the Data Subject and committing a breach of trust, and a contravention of the Protection of Personal Information Act (PoPIA) and maybe also of the General Data Protection Rules of the EU (GDPR).
The USA Fair Debt Collection Practices Act (FDCPA) curbs abuses by Debt Collection agencies, including harassing the debtor, calling third parties, such as family members or employers, who are not cosigners of the loan; and making false statements about the debtor or disclosing the debt of the actual debtor. This same prohibition exists in the SA Debt Collectors Act (DCA).
In the FDCPA section 804 provides that any Debt Collector communicating with any person other than the consumer (the Data Subject) for the purpose of acquiring location information about the consumer shall identify himself, and state that he is confirming or correcting location information concerning the consumer. The DCA Code of Conduct in paragraph 3(n) provides that the Debt Collector may not communicate with an employer, acquaintance, friend, relative or neighbour of the debtor, unless such a person stands surety for the debtor, or unless it is to obtain the debtor’s address or telephone number.
On the surface it looks like a Debt Collector may communicate under the above mentioned circumstances with a person, other than the debtor, to obtain new location information of the debtor. The big factor must not be overlooked in that both the FDCPA and the DCA was promulgated before PoPIA and the GDPR. In neither of the two Acts provision has been made that the Responsible Party may “change” the permissible use of the Data Subjects Personal Data.
So let's get onto the same page: a Consumer applies for Credit and the Credit Provider, in the application for credit, asks for “references”. The Consumer gives the names and telephone numbers of his/her “references” - why ? Well it is clear that the Consumer is trying to build trust with the Credit Provider to approve his/her credit application. We must remember that the “references” never consented to their Personal Information being disclosed to the Credit Provider. The Credit Provider would use the “reference” Personal Data to validate and acquire new location information about the Consumer should he/she abscond in the future. In my mind it is clear that the permissible purpose, to process the “reference” Personal Information by the Credit Provider, is only to validate and acquire from the “reference” the Consumer's new location information.
In terms of the National Credit Act (NCA) the Credit Agreement and the Personal Data of the Consumer must be submitted to the Credit Bureau. The Credit Bureau's permissible purpose to process the “reference” Personal Information stems from the NCA. The Credit Bureau is not authorised to “change” the permissible purpose and on-sell the “reference” Personal Data without the explicit and tacit consent of the “reference” (also a Data Subject) to any third party. Important to remember that the “reference” up to this point never consented to his/her Personal Data to be processed, the processing that took place up to this point rests on the fact that the Consumer who applied for Credit volunteered the “reference's" data to the Credit Provider and the Credit Provider used it in the first instance only to validate and acquire new location information on the Consumer if needed.
It is common practice that the Credit Provider would hand the Consumers account over for collection, when in default, to an external third party, for instance an Attorney or Registered Debt Collector (EDC). This EDC now needs to trace the Consumer and needs new location information. Up to now some Credit Bureaus would sign a contract with the EDC and supply the EDC with all Personal Data they matched to the Consumer including the original “reference” Personal Information lodge with the Credit Agreement in terms of the NCA. Any other data that is “connected” to the Consumer is also supplied in a “tracing report” to the EDC. The “concern bar” is now raised due to the fact that all this “extra” Personal Data of people, totally unrelated to the original Credit Agreement, is processed by the EDC without their consent and no permissible purpose.
However, the POPIA specifically says this does not apply to processing based on consent. Consent must always be specific and informed. You need to either get fresh consent which specifically covers the new purpose, or find a different basis for the new purpose. If you do get specific consent for the new purpose, you do not need to show it is compatible.
It is common ground that the “reference” Personal Data disclose by the Consumer never gave consent for their Personal Data to be processed, so the only thing left is permissible purpose. One can argue that the permissible purpose for processing by the Credit Provider and the Credit Bureau stems from the NCA, but that did not include any other permissible purpose. If now argued that the permissible purpose changed over time and there is no need for a new lawful basis for processing because the new purpose is compatible with the original purpose, we should take into account any link between the initial purpose and the new purpose, the context in which the information was collected, in particular the relationship between the Credit Provider and the “reference” and what the “reference” would reasonably expect, the nature of the personal information, the possible consequences for “references” (also data subjects) of the new processing, and whether there are appropriate safeguards in place.
As a general rule, if the new purpose is very different from the original purpose, would be unexpected, or would have an unjustified impact on the data subject, it is unlikely to be compatible with the Credit Provider's original purpose for collecting the information. The EDC would need to identify and document a new lawful basis to process the information of the “reference” for that new purpose.
The fact that it might be “how business was done up till now” does not mean that it was/is permissible. Debt Recovery Agents do their utmost to get new location and “reference” data in order to “trace” the debtor and agreed, it is a difficult and expensive process, but circumventing the Protection of Personal Information Act is not the way to go, the real answer lies in “fixing” the challenge not circumventing it.
We will soon have a SAFARI into the Usage of Data in Credit Management - watch your mail.
Eugenè Joubert - Chairman of the Corporate Rebels Group of Companies
Credit risk analysts at emerging market banks not only need high-quality data, but also the necessary tools to manage it. Improving consistency and reducing the risk of errors in credit risk data create more time to concentrate on the core activity of analysis.
Regulatory and competitive pressures in global financial markets have combined in such a way that banks are now required to handle increasing volumes of data. Having the right tools available to gather and standardise this information to fit internal credit risk analysis systems can save time and effort, allowing the actual analytical process to start on a strong footing. However, for banks in emerging markets in particular, it can be a struggle to not only find the necessary information, but also build the best systems to efficiently and effectively standardise and format this data.
The most important task is collecting the correct information for the credit risk analysis and reporting in order to conduct the required assessment and analysis using this information correctly and to use it effectively in assessing the credit risk to avoid any potential loss. Alternatively, an organisation can purchase credit assessments for specific sectors or regions from a third-party vendor that can provide a comprehensive analysis based on a variety of qualitative and quantitative criteria. Once banks in emerging regions locate the correct information, they must begin the process of integrating it into their own internal systems before the credit risk analysis process can even begin. This often involves checking the data for accuracy before standardising and formatting it. …………….. > read more
Cognitive technology has the power to enhance the efficiency and accuracy of credit risk management practices, but views on implementation remain mixed. As these new technologies become more established, organisations that embrace them can become more agile and competitive. Financial institutions are increasingly interested in learning about the ways cognitive technology can enhance risk management practices in areas such as credit.
By leveraging machine learning and semantic understanding of unstructured data, cognitive technology can increase data and process efficiencies across an organisation and enhance predictive accuracy. In relation to credit specifically, these solutions could strengthen a bank’s overall credit risk management strategy, enabling organisations that deploy cognitive techniques to become more agile competitors in an increasingly demanding credit landscape. How can cognitive technology help the credit industry? There is scope to apply cognitive capabilities to an array of situations across the entire credit life cycle – from the loan negotiation stage, through performance monitoring, to default and recovery of principal, when banks must be able to restructure and recover collateral effectively and cost-efficiently. At present, cognitive technology provides a significant opportunity for improving data and processes throughout all these stages of the credit life cycle.
At the loan negotiation stage, for example, cognitive technology could help a bank increase efficiency and better satisfy ongoing compliance needs by supporting the automatic collection and collation of accurate client information. It might also improve and automate the bank’s knowledge of its clients’ capital structures and needs, as well as that of its wider corporate family and competitors. Cognitive capabilities could be particularly useful in key areas of compliance such as know-your-customer (KYC) procedures, in which the ability to increase the efficiency and accuracy of credit risk research would be a major operational advantage for many banks. Deploying cognitive technology to monitor company performance on an ongoing basis could also support the collateral management team, enhancing the credit analysis process and providing banks with timely access to more accurate, in-depth client information. In using such tools to develop a better early warning system, banks can create credit risk management strategies that are more proactive, protecting the organisation from potential unsecured exposure to credit risk and resulting losses.
While it is clear that cognitive technology will be able to significantly enhance a bank’s operations, research and development is still in the early stages, particularly in the credit risk world. As a result, there is uncertainty among credit professionals regarding its implementation and the exact results to expect in relation to credit systems and processes. This uncertainty is likely to disappear as banks and credit risk professionals gain a better understanding of cognitive technologies and start to see the impact of these technologies on the market. ……………..> read more
The black swan theory is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalised after the fact with the benefit of hindsight. The term is based on an ancient saying that presumed black swans did not exist - a saying that became reinterpreted to teach a different lesson after black swans were discovered in the wild.
The theory was developed by Nassim Nicholas Taleb to explain:
- The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
- The non-computability of the probability of the consequential rare events using scientific methods - owing to the very nature of small probabilities.
- The psychological biases that blind people, both individually and collectively, to uncertainty and to a rare event's massive role in historical affairs.
Unlike the earlier and broader "black swan problem" in philosophy - the problem of induction - Taleb's "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences. More technically, in the scientific monograph "Silent Risk", Taleb mathematically defines the black swan problem as "stemming from the use of degenerate meta-probability.
Can we call the Corona Virus a Black Swan event? To do so it must be an event with the following three attributes:
- First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility.
- Second, it carries an extreme 'impact'.
- Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
So, let us check the boxes for the Credit Industry:
Is Covid-19 a surprise?
Personally I must admit that I did not foresee such an “outlier”. Quite frankly, in the past I have talked about “outliers” but foresee this one, not a chance in hell. Outliers in Credit came in “no surprise wrappings” clearly stating their purpose - even if the purpose is to rectify the market like the Credit Crunch a while ago. Credit used to be a segment of business that had no unforeseen outliers, normally when the outlier happened it came as no surprise. The fact that EAO’s were made extra difficult to obtain came as no surprise, we all knew about the abuse and also knew it is going to blow up. Same with Debt Relief, the volume of credit pushed into the market to gullible consumers was a time bomb with a short fuse, no surprises that Government was going to protect their voters.
Does Covid-19 have a major effect?
“Major effect” !!! you ain’t seen nothing yet !!! This surprise came without warning and that caught everybody with their pants down, no parked reserves for this kind of event. What could be more major than shutting down businesses and locking their clients away - now you tell me “is this going to have a major effect?”
Is Covid-19 rationalised by hindsight?
It is not a question of “time will tell” - all so called experts on Corvid-19 are already telling us why and from what this stems. We don’t even have the luxury of hindsight and they are already rationalising it.
But on a lighter note, this time the Credit Industry have the luxury of “time on their hands” to come up with plans.
JH Eugenè Joubert
As the economy faces unprecedented unemployment rates and an impending recession, record numbers of financial accounts across industries will enter collections. According to NPR, banks are preparing for “an onslaught of defaults in debt.” Agencies face staffing challenges with limited office use and work-from-home challenges.
Additionally, the recession may accelerate consumer contact information changes, either from moving residences or changing phone information. Poor data and an increase in call blocking and SPAM tagging could worsen RPC rates. Collections organisations that have more accurate consumer phone and email data, and the phone behaviour of their target consumers, will be better positioned to efficiently make contact and arrange for payment.
How are you preparing for fewer collectors and more accounts?
Learn how other agencies are leveraging the following insights to improve their contact efficiency and effectiveness:
- Omnichannel phone, email, and device data for coordinated contact attempts across channels
- Dialing the phone number a consumer uses most
- Contacting the consumer during the times and days when they are most likely to answer
- Mitigating inappropriate call blocking or spam-mislabeling.
> view full article
The promise of new rules for debt collection has been discussed since 2016. The CFPB’s actual proposal this year was a big surprise to many, including Harry Strausser, ACA Director of Education. “The industry has been waiting for many years for new rules to be proposed by the CFPB,” says Strausser.
However, he was surprised by more than the proposed rule’s release. Industry reaction is not what Strausser would have anticipated. “Overall the response to the proposed changes has been rather calm and almost dismissive with many industry players I talk to. They have a “wait and see” attitude and don’t seem terribly concerned about the anticipated revisions.”
> view full article
The New York City Department of Consumer Affairs (DCA) provided some clarity to debt collectors on its newly-enacted Limited English Proficiency Rule (LEP Rule). DCA issued an FAQ document and a form for the annual reporting requirement for the LEP Rule, and also announced yet another extension of its grace period for enforcement, which now runs through October 1, 2020. In this article, you’ll find a summary of the three-page, thirteen-question long document.
Applicability: The LEP Rule applies to anyone who is required to obtain a Debt Collection Agency license in NYC. When asked if the LEP Rule applies to creditors, DCA says “yes, no, and maybe” depending on the functions of the creditor’s actions and other statutory litmus tests (citations can be found in the FAQ document).
The LEP Rule does not apply to litigation activities that can only be performed by a licensed attorney, such as filing a lawsuit or requesting an income execution.
Annual reporting requirement
The annual report form is a lot less convoluted than many speculated when the rule was first issued. The reporting form can be found here, and only requires collectors to keep a month-by-month log of the:
- Number of NYC consumer accounts on which the agency collected or attempted to collect a debt in a language other than English; and
- Number of employees who collected or attempted to collect a debt from NYC consumers in a language other than English.
These are aggregate numbers, the report form does not call for an account-by-account or consumer-by-consumer log.
Agencies need to maintain the annual report but don’t need to send it to DCA on an annual basis. DCA only wants to see it if they request it.
> view full article
Lobbyists argue that debt collection must not be suspended during the pandemic, citing an “ethnically diverse” and women-majority workforce.
DEBT COLLECTORS, facing growing demands to freeze the collection of debt across the country amid the economic hardship caused by the coronavirus pandemic, are mobilizing their lobbyists to push back.
In New York, residents are receiving a 30-day reprieve from the collection of state-owned medical and student debt. Chicago Mayor Lori Lightfoot this week similarly announced an end to the collection of city debt, including late parking fines, through at least April 30.
> view full article
“Neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry”- William Shakespeare
The Du Bruyn and Others v Karsten Judgment is extremely important given the volatile business environment that we are living in. Many South Africans have experienced the destructive economic effects of the national lockdown in response to Covid-19. Struggling individuals and businesses will be forced to seek capital at the doors of friends, family members and the informal credit sector with the hope of keeping afloat.
Businesses and individuals operating outside the credit industry should be wary of the implications of the Supreme Court of Appeal judgment on once-off credit transactions and loan agreements as such transactions and their underlying agreements could be declared void if the entity or person providing the loan is not a registered credit provider.
In order for the National Credit Act 34 of 2005 (NCA) to apply, a transaction must fall within the definition of a “Credit Agreement” outlined in section 8 of the NCA. Such transactions include an agreement in terms of which the repayment of an amount loaned by a credit provider to a consumer, or payment for goods or services, is deferred; and interest or other charges are payable in respect of such deferment.
Section 40(1) of the NCA places an obligation on a credit provider to register as such if the total principal debt under all outstanding credit agreements exceeds a certain threshold. The Minister is empowered by the NCA to determine such threshold by way of notice in the Government Gazette, which he has set at R0 (11 May 2016).
Sections 40 and 89 of the NCA also provide that an unregistered credit provider cannot offer, make available or extend credit. A credit provider must be registered at the time of entering into a credit agreement. In the absence of such registration, a credit agreement may be declared unlawful and void. If a credit agreement is unlawful, despite any other legislation or any provision of an agreement to the contrary, a court must make a just and equitable order including but not limited to an order that the credit agreement is void as from the date it was entered into.
> Read the Article ……..…….. > View the Judgement in our Library
“Screw your credit score if you can’t cover the basics” - USA
Taking advantage of financial aid isn't supposed to hurt your credit, but some consumers are being dinged. With the coronavirus pandemic sending millions of Americans scrambling to make ends meet, another type of economic fallout is bubbling in the background: consumers’ worsening credit status due to late or unpaid bills.
But making a bad situation worse, some credit scores are being mistakenly dinged by the very lenders that, thanks to the protections of the Coronavirus Aid, Relief, and Economic Security Act passed in March, are supposed to be providing payment relief. The law lets you postpone payments on federally backed mortgages for up to a year, suspends all payments on federal student loans through Sept. 30, and—supposedly—ensures that your credit isn’t negatively affected if you take advantage of these provisions.
But reports of people whose credit scores are nonetheless wrongly being harmed keep piling up, both in media reports and in stories shared directly with Consumer Reports by readers. They include reports from consumers who say their credit scores dropped when they accepted—and in some cases merely inquired about—COVID-19-related mortgage forbearance, a direct violation of the coronavirus relief law. view full article
For those still unemployed or furloughed because of the coronavirus pandemic’s business closures, or even those who are starting to return to work, economic hardships won’t go away overnight. The last thing people need is a bad credit score hobbling efforts to get back on their feet.
When the COVID-19 restrictions resulted in a wave of companies, restaurants, retail stores, salons and other services having to close in the name of safety, millions of Americans were plunged into a financial nightmare. Rents and mortgages couldn’t be paid, let alone car loans, credit card debt, utilities and other bills. There’s been some government relief in the form of stimulus payments and a cessation of evictions, but those can only go so far toward lifting fiscal burdens.
The CARES Act gave consumer credit scores some breathing room — if your account is current and you strike an agreement with a creditor to make a partial payment or skip a payment, that creditor must report that your account is current. This provision only applies to agreements made between Jan. 31, 2020, and either 120 days after March 27, 2020, or 120 days after the national COVID-19 emergency ends, whichever is later.
But what happens when that time is up? It’s back to business as usual, and late payments, missed payments and the like will be reported as such, negatively affecting your score.
It’s unlikely that, even with renewed employment, a consumer could get caught up with late rent or mortgage payments as well as bills in such a time frame, especially if they remain jobless beyond the pandemic period. Unemployment benefits must pay for current expenses, such as food and gas, and initial paychecks will also have to cover necessities before tackling missed payments.
As such, credit scores will take a hit, which could result in higher interest on loans, credit cards and mortgages. A poor score could even have a deleterious effect on securing a job or place to live.
In a bid to be helpful, the three major credit bureaus — TransUnion TRU, Equifax and Experian — are offering free weekly online credit reports from now until April 2021. Nice, but that doesn’t help to pay the bills, nor stop a late payment from being reported as such once the CARES Act credit time frame is up. view full article
“Update on the Credit and Collections Industry in SA”
Looking back on the COVID-19 situation we could not have foreseen this kind of impact, never mind plan for it. Many a debate if this event is a Black Swan event or not is doing the rounds. Irrespective if it is or not, it is disastrous and one can only hope that the industry does find its feet and begin to recover.
Various a Collection Agencies reported that their systems were not ready to let staff work from home (so called “Home Based Agents”). Software Service Providers worked round the clock to help Agencies to get some Home Based Agents going but, with the expensive data costs in SA, everybody had to be careful as this cost was never negotiated with the clients. Prior to COVID-19 the collections commissions were already under pressure and now with extra software costs and huge data bills the future of smaller outfits are looking “sad” to say the least.
Credit Providers and Debt Collectors are both looking at “new” ways of interacting with Consumers using the excuse that they have no money to pay (real or not - the excuse is being used). Agents hardly ever had to cope with this situation before, this excuse was used in the past to “get you off my back” but now more than 90% of the time it is a fact. Consumers are suffering and Agents needs to be careful in their communication with the Consumers - nobody wants “Hostile Consumers” because their situation is not taken into consideration.
The other side of the coin is Agents earn their income mostly from commission on successful collections, not recorded excuses. So, the remuneration of the Agents needs to be looked at, imagine making calls the whole day and collecting little, resulting in little pay going home. Bottom line is that the person on the telephone trying to collect now needs all the help we can give them, in short, they need extra skills to be able to handle this “new” situation they find themselves in.
View the ToolBox we created in order to help the Agents on the telephones: ToolBox
The President of South Africa has proclaimed that the Protection of Personal Information Act (PoPIA) will commence on 1 July 2020. This means that you still have 8 months to comply with PoPIA. The wait is finally over and it is now time for us to take action.
But the big question is what action must we take?
We want to take practical and effective action that is going to achieve the best results at the lowest cost. There are many possible roads we could take over the next 8 months to get the data protection right and it’s important to make the choices for our companies.
Must our company (and I) comply with PoPIA?
For many, the answer will be yes, but some may be surprised to find out that they don’t need to comply with the PoPIA, unlike the GDPR, does not apply extraterritorially. Meaning that it only applies to companies inside South Africa. Essentially, if you are domiciled in South Africa or you process personal information in South Africa, then you need to comply with PoPIA. In addition, the processing of some personal information is excluded. For example, if you are processing purely for a personal reason or as a household activity then PoPIA won’t apply to you.
Do I have high-level awareness of the POPI Act?
Knowledge is Power. Having a high-level awareness of PoPI is crucial in helping you decide what your next steps are going to be.
Am I the right person to be responsible for this?
Every company has an Information Officer by default and they are responsible for ensuring that the company complies with PoPIA. If you are currently the Information Officer, now is the time to ask: “Do I want to continue to be the Information Officer?” If you’re not, the question is: “Am I the right person to be the Information Officer?” You might also be asking: “Who should I appoint as the Information Officer?”
Italy’s privacy regulator imposes a million Euro fine on Facebook. Facebook’s pre-GDPR data protection breaches in the context of the Cambridge Analytica fiasco have now attracted a million Euro fine imposed by the Italian privacy regulator. The Italian regulator found that Facebook had disclosed to the third-party “This Is Your Digital Life” app, personal data of 214,077 Italian users. These users had not been informed of the sharing of their data and had not given their consent to such sharing, in violation of Italy’s pre-GDPR data protection law.
Although the data processed by the app was generally the basis for Cambridge Analytica’s attempts to influence the U.S. presidential elections in 2016, the Italian regulator found that the data from these Italian users had not been transmitted to Cambridge Analytica. In determining the fine, the Italian regulator took into account the size of the database in question as well as Facebook’s economic status and the number of its users both worldwide and in Italy. The Italian regulator also dismissed Facebook’s arguments for a reduced fine of €52,000.
ICO’s Report on AdTech and Real Time Bidding. The UK’s Information Commissioner’s Office (ICO) has published a report criticizing companies that use online advertising technologies and real-time bidding. The report outlines the issues that require attention and outlines a six-month timescale after which the ICO will re-examine the matter.
In Real-Time Bidding, online ad placements (‘impressions’) are enabled through the auctioning of advertising space in real time, during the milliseconds a webpage takes to load on a user’s browser. Through this process, the online behavioral data of ad-targeted users is shard with AdTech companies billions of times a day. The data shared can include user geo-location data, sexual orientation, religion, political opinions, and online habits, and this processing enables user behavioral profiling.
The ICO’s report criticizes the wrongful reliance by AdTech companies on the GDPR’s legitimate interests as a legal basis to legitimize this processing, without obtaining users’ affirmative consent to this data processing. The ICO also found that privacy policies are not sufficiently clear on how personal data is handled in the Real-Time Bidding process and that companies neglect to conduct a Data Protection Impact Assessment (DPIA) before they engage in this form of processing, in violation of the GDPR.
A Danish furniture company faces fine for over-retaining customers’ personal data. The Danish Data Protection Authority has recommended imposing a €230,000 fine on IDdesign, a large Danish furniture company, that had processed personal data about 385,000 customers for a longer period than necessary for the purpose the data was collected, in violation of the GDPR’s data minimization principle. In addition, the company did not set a retention data policy and did not comply with the accountability principle required by the GDPR.
Spanish Soccer League fined for spying on fans through its mobile app. The Spanish Data Protection Authority imposed a €250,000 fine on the Spanish Major Soccer League (‘La Liga’) after it found that the League had used its mobile app to spy on users through their smartphones’ microphones, in order to help it determine whether bars had pirated soccer matches. La Liga’s misconduct was found to be an infringement of the GDPR because it had to re-inform its users each time the app used the device’s microphone, and not just by notifying of this practice upon download and initial installation of the app.
The regulator also held that La Liga must provide an option for users to withdraw their consent to this form of tracking, at any time, and not just seek the user’s initial consent to this processing. La Liga indicated that it plans to appeal the regulator’s decision, which is the largest fine imposed in Spain to date for GDPR violations.
The GDPR’s first anniversary shows compliance is a challenge. The EU Commission has published two reviews marking the GDPR’s first anniversary. According to the first survey, more than two-thirds of Europeans have heard about the GDPR, but just half of them understand the subject of the regulations. The three most-exercised rights are opting-out of direct marketing (24%), accessing the personal data (18%) and correcting it when it is inaccurate (16%). Only one of six data subjects read privacy policies completely, but every other person has attempted to change the default privacy setting on their social network profile.
The second report examined organizations’ compliance with the GDPR. Some organizations indicated that the GDPR uses vague terms such as “high risk” to data subjects. Many organizations feel that the GDPR may adversely impact innovation, particularly due to the strict interpretation of the GDPR’s requirement for automated decision-making without human involvement. Another concern raised is that the high demand for Data Protection Officers (DPOs) compared with their limited availability in the market, pushes organizations to appoint insufficiently qualified DPOs.
Read this article published in the Internet, Cyber and Copyright Group’s June 2019 Newsletter. read more
When will the GDPR apply directly to an SA company? This is an important question to answer because the penalties for non-compliance are severe. There are fines of up to 20,000,000 EUR or 4% of total global turnover.
1. If an organisation is incorporated in Europe, that entity has to comply with all European laws, including the GDPR.
2. If an organisation is active in Europe through a ‘stable arrangement’ in the EU, the GDPR will apply. This includes instances where a South African business is active in Europe through an agent, a sales office or a branch in Europe. The European Commission will look at factors such as whether the SA company has a website in a European language (other than English), whether it has equipment in Europe or a European postal address.
3. If the SA business is not established in Europe under questions 1 and 2, the GDPR may still apply if it offers goods or services to individuals while they are in the EU. When the European Commission determines whether this is the case they take factors into account such as whether these services are offered in an EU language (other than English), whether payment can be made in an EU currency and whether your marketing material specifically mentions customers located in the EU. This does not mean that the GDPR will apply to European citizens while they are in South Africa. So, just because you have European customers doesn’t mean that you have to comply. It will depend on whether you are delivering goods or services to individuals while they are in the EU.
4. Lastly, and perhaps most importantly for digital marketers, the GDPR will apply to a South African business if it is monitoring the behaviour of individuals while they are in the EU. If the business does analytics on individuals while they are in the EU to create a profile of them, or to analyse their preferences, behaviour or attitudes, the GDPR applies. This means that if a digital marketer is profiling and targeting individuals while they are in Europe, the GDPR will apply.
Long, long ago, in fact in 1969, I had a special Springbok, his name was “Prescription” and he could go without water for 3 years - but then he died; reason being that I did not give him water in that 3 year period. If I had given him water, not just any old water: special water (tacit and expressed and enough to keep him going), I could have extended his life by another 3 years.
Before we move into the debate about: “I is - I was - I have been a Springbok” we need to be reminded ourselves about a pacta sunt servanda. For those who don’t have Latin as home language it means “the sanctity (freedom) of contracts” and it is a doctrine we find in law. In short is every person has the right to freely enter into contracts. This principle has four aspects: 1: freedom from interference by the state to negotiate the terms of a contract, and the corrective freedom from having them imposed on one; 2: freedom to select the person with whom one contracts; 3: freedom not to contract; and 4: freedom from having a contract one has made being interfered with.
One should always bear in mind that we all have an obligation to honour the contracts we enter into, most important the moral obligation to settle the debt that we agreed on. Lawmakers have an obligation to protect the consumer but the opposite is also true hence the principle. Once we have an imbalance between the weighting of the protection of the consumer (prescription) versus the protection of the credit grantor (“sanctity of contract” - creditor/economy) then there is no “equity” and than cannot be sound reasoning.
So many times the issue of Prescription has been raised and the question is easy but the answer apparently not: “Once prescription has run the full period, without being interrupted, can the Creditor still pursue the debt?” I acknowledge many authors on the topic and trust that they will forgive me for using some of their writings and combining that with mine - all in an effort to clear some the confusion.
The 1969 Prescription Act
It is true that when you appear in court for non-payment of a debt, you may raise the defence of prescription at any time during the proceedings. What does the defence entail: a set period of time has passed and by law, you are no longer legally obliged to pay the debt or a subsidiary debt that arose from the debt - [chapter iv sec 17(2)]. Nowhere in the Act does it stipulate that the defence can only be raised in a court of law.
What about all the provisions of the other chapters in the Act? Do we ignore them and if not; how are they applied? The general rule (3 years) applies to all debts covered by South African law unless the general rule is inconsistent with the provisions of any Act of Parliament that: prescribes a specified period within which a claim is to be made or an action is to be instituted in respect of a debt; or imposes conditions on initiating an action for the recovery of a debt. The general rule does not apply where another law applies to the prescription of a debt which arose or arises out of an advance or loan of money by an insurer to any person in respect of an insurance policy issued by such insurer before 1 January 1974. The Act is rarely worth considering when dealing with debts that only prescribe after 30 years. The 30-year period applies to any debt: secured by mortgage bond; that is a judgment debt; relating to taxation by any law; levied by or under any law; owed to the government for any share of the profits, royalties or similar consideration payable for the right to mine minerals or other substances. Similarly the Act will seldom be applied to other debts owed to the government due to: an advance or loan of money; or a sale or lease of land by the State. In such instances 15 years must pass before prescription can be considered. With regard to a debt not mentioned above and arising from a negotiable instrument (such as a cheque or a bill of exchange) or from the less-commonly used notarial contract the prescription period is 6 years. Any debt not mentioned in the paragraphs above the prescription period is 3 years, unless a national act provides otherwise.
Prescription starts to run as soon as the debt is due not to be confused with the date of default. Here we are referred to the wording of the contract between the parties unless: the debtor wilfully prevented the creditor from coming to know of the existence of the debt - prescription then starts once the creditor becomes aware of the existence of the debt; or the creditor did not have knowledge of the identity of the debtor and of the facts from which the debt arises - prescription then starts from the time the creditor is deemed to have such knowledge based on the fact that he, she or it could have gained such knowledge by exercising reasonable care.
Payment made by a debtor after prescription - a payment by a debtor that could have relied on prescription, or in fact relied on prescription, will be accepted in law as payment of a debt - [chapter iii sec 10 (3)].
Prescription can be delayed - Anyone wishing to rely on prescription as a defence, or anyone wishing to avoid such a defence, should study section 13 of the Act. This section raises the possibility that prescription is postponed where certain facts impede the creditor’s ability to institute action in a court such as the fact that the creditor was/is: a minor; declared mentally unfit by court order; a person under curatorship; prevented by superior force including any law or any order of court from judicial interruption of prescription; dealing with a debtor that was/is outside South Africa; married to the debtor; in a partnership with the debtor and the debt arose out of the partnership relationship; or a juristic person (close corporation, company, co-operative) and the debtor is a member of the governing body of the juristic person.
Postponement of prescription must also be considered where - the debt is the object of a dispute subjected to arbitration; the debt is the object of a claim filed against the estate of a debtor who is deceased or against the insolvent estate of the debtor or against a company in liquidation or against an applicant under the Agricultural Credit; or the creditor or the debtor is deceased and an executor of the estate in question has not yet been appointed; where the reciprocal debt in a contract has not prescribed yet.
Interruption of prescription - an acknowledgement of liability and a payment interrupts prescription. Prescription is interrupted by any express or tacit acknowledgement or payment of liability by the debtor. In such a situation prescription starts afresh from the day: on which the interruption takes place; or upon which the debt again becomes due, if at the time of the interruption or at any time thereafter the parties postpone the due date of the debt. We also see that we can have a judicial interruption of prescription i.e. the service on the debtor of any process whereby the creditor claims payment of the debt. Unless the debtor acknowledges liability, such interruption of prescription lapses, and the running of prescription will not be deemed to have been interrupted, if the creditor: does not successfully prosecute the claim under the process in question to final judgment; or prosecutes the claim but abandons the judgment or the judgment is set aside. If the debtor acknowledges liability, and the creditor does not prosecute the claim to final judgment, prescription shall commence to run afresh from the day: on which the debtor acknowledges liability; or upon which the debt again becomes due if at the time when the debtor acknowledges liability or at any time thereafter the parties postpone the due date of the debt.
If the running of prescription is interrupted and the creditor successfully prosecutes the claim to final judgment without abandoning it or having it set aside, prescription starts afresh on the day on which the judgment of the court becomes executable. If any person is joined as a defendant on own application, the process whereby the creditor claims payment of the debt shall be deemed to have been served on such person on the date of such joining.
So what is the fuss ???? - easy !!!! The Prescription Act has NO penalty for overstepping the provisions of the Act - so who cared if the Springbok died. We just ignored the fact that he is dead - we still went on to trace and chase him for his biltong - it was/is not a punishable offence or prohibited conduct to trace, chase, collect or sell his biltong. This is still the position for all other debt except debt falling inside the ambit of the National Credit Act once the National Credit Amendment Act is implemented. Then it will be prohibited conduct to chase a dead NCA Springbok (one that prescribed and now forms part of extinguished fauna) for the biltong or value of his carcass and an administrative fine of R 1,000,000 or 10% of yearly turnover could be imposed by the Tribunal.
In conclusion I leave you with the dictionaries definition of “Extinguished”:
Part of Speech: adjective. Meaning: of a conditioned response; caused to die out because of the absence or withdrawal of reinforcement. Similar: destroyed (spoiled or ruined or demolished). Main Entry: extinguish. Part of Speech: verb. Definition: kill; quash. Synonyms: abate, abolish, annihilate, blot out, check, crush, destroy, eliminate, end, eradicate, erase, expunge, exterminate, extirpate, obliterate, obscure, put down, put the lid on, quell, remove, squash, stamp out, suppress, wipe out. Antonyms: bear, create. Origin: Latin exstinguere (from ex- + stinguere to extinguish) + English -ish (as in abolish); akin to Latin instigare to incite.
Well I guess one must have a point of view. As stated in the beginning, this article is a combination of opinions that I could find and added to it my own views. Least of all is it not a legal opinion, but it should give the novice on “Prescription” a pretty good start in studying this topic, which is as old as debt itself.
Trust that you will now know if my Springbok has been extinguished by prescription, or if in fact he has been given tacit, expressed and enough water, to indicate that we want to keep him alive, during the 3 year period.
JH Eugenè Joubert
Chairman Corporate Rebels
FSCA’s objectives as stipulated in the Financial Sector Regulation Act 9 of 2017
Services in relation to credit, including debt collection. In relation to credit providers regulated by the NCR, the FSCA’s jurisdiction excludes the actual content and entering into of credit agreements, but includes the provision of financial services ‘related to’ the provision of credit15 and aspects of the corporate governance of credit providers. The FSCA is required to license and supervise these activities. We are working with the NCR to refine the scope of these ‘related’ services and our respective roles in relation to them, but focus areas include advice on credit, distribution models used in the credit industry, and enhanced disclosure, advertising and marketing standards for credit offerings.
The FSR Act specifically includes debt collection as a service ‘related’ to credit, which will be subject to FSCA oversight. Our focus will be on debt collection in relation to credit agreements falling within the NCR’s jurisdiction, including where debts are ceded to a third party for value (‘selling the book of debt’). We will work with the NCR and the Department of Justice to align our regulatory and supervisory approach to debt collection with other existing frameworks. Read the report here
IS IT JUSTICE OR AN EXTENSION OF PRESCRIPTION PERIOD
In South Africa, generally, prescription is regulated by the Prescription Act 68 of 1969 and in delictual, contractual (or any other liability), the prescription period is three years. The Prescription Act also delineates when prescription commences and how can it be interrupted.
Sometimes, particularly in medical malpractice matters, the lines may be blurred as to when prescription commences. In RAF matters, the Road Accident Fund Act regulates its own prescription periods and the pertinent provision in this regard is Section 23. In terms of the provision, the claim “shall prescribe upon the expiry of a period of three years from the date upon which the cause of action arose”.
Section 23(3) provides that “[N]o claim which has been lodged in terms of section 17(4)(a) or 24 shall prescribe before the expiry of a period of five years from the date on which the cause of action arose.” The SCA, in the matter of Masindi vs RAF, and, subsequently, the Pretoria High Court, in the matter of Gabuza vs RAF, the courts were faced with an intricate situation where, plainly put, they had to decide whether to deprive claimants few days (from the prescribed three years) or grant an extra day, in favour of the claimants.
Almost three months after the SCA’s decision in Masindi, the Pretoria High Court heard and delivered a judgement in an almost similar case, in the matter of Gabuza vs RAF. The difference between Masindi and Gabuza is that, with the latter case, the issue was about the alleged late lodging of the claim with the RAF and not with issuing and service. In Gabuza, the collision occurred on 22 March 2012 and was lodged on 23 March 2015. Thus, the last day for lodging would have been 21 March 2015, which fell on a Saturday. Even more interesting, Section 24 of the RAF Act stipulates two alternative methods of lodging i.e. via registered post and by hand. It was argued on behalf of the RAF that the claimant could still have lodged via registered post on a Saturday, 21 March 2015. The court, albeit accepting that the three-year period of lodging lapsed on 21 March 2019, it considered the practical reality that in South Africa, Post Offices close at 13h00 on Saturdays and the ensuing impossibility to lodge a claim for the remainder of the day that would equal the normal hours of an ordinary work-day. Against this background, the court adopted the Masindi case principle i.e. the next working day is the last day to lodge.
From the two above mentioned cases, it seems as though the courts are inclined to grant claimants a further day or days than depriving them a day or few days. In the matter of Masindi, had the court held that the last day for issuing and serving was Friday, 13 June 2014, the claimant would have been deprived of at least three days and, thus, her matter would have prescribed before a “complete lapse” of five years. A similar result would have ensued in Gabuza, had the high court held otherwise – though the claimant had some hours to lodge the claim on the exact last day.
In light of these matters, it seems trite that, in such matters, justice would get preference over an interpretation that would lead to absurd result. In doing so, the courts are giving true effect to the spirit, purpose and objective of the Constitution. The courts’ decisions are even more plausible, specifically, in RAF matters, considering the nature of the claims – it sometimes takes a while before a potential claimant can get legal assistance. Interestingly, the court, in Masindi, emphasised that each matter will be decided on its own merits. This then permeates further matters of similar nature to be adjudicated upon in future. Of importance, however, from Masindi and Gabuza matters, the courts provided direction and certainty in matters where the last day for lodging or issuing and serving falls on dies non. read more
The National Assembly is about to head into its final week before disbanding for May’s national elections.
This has led to a frenzy as legislation and important business that can be completed is rushed to the finishing line while other less urgent parliamentary business is dropped for lack of time, reports PMG. Notably, A major new bill wAS adopted beginning of March by both houses, and have now been sent to President Cyril Ramaphosa to be signed into law.
The National Credit Amendment Bill was officially passed by the National Council of Provinces on 8 March '20 and has now been sent to President Cyril Ramaphosa to be signed into law. The bill aims to provide relief to over-indebted South Africans who have no other means of extracting themselves from over-indebtedness.
Specifically, the bill will allow certain applicants to have their debt suspended in part or in full for up to 24 months. This debt may then be extinguished altogether if the financial circumstances of the applicant do not improve.
The criteria for meeting this debt write-off include:
- Where the unsecured debt is not more than R50,000;
- Where the unsecured debt was accrued through unsecured credit agreements, unsecured short term credit transactions or unsecured credit facilities only;
- Where the person earned no more than R7,500 a month over the last six months;
The bill also introduces a number of new offences related to debt intervention. Under the bill, it will now be an offence for a person who intentionally submits false information related to debt intervention. Any person who intentionally alters his or her financial circumstances, or persons who intentionally alter their joint financial circumstances, to qualify for debt intervention, will also be guilty of an offence.
The Banking Association of South Africa (Basa) made it clear that it does not support the principle of debt forgiveness – for very obvious financial reasons, but also for what it would do to the lending and credit industry. Aside from the costs banks would incur writing off the debt, the most likely reaction from banks would be to make lending conditions much tighter which would make it more difficult for the poor to secure credit, Basa said.
Reckless credit granting, debt collections and emolument attachment orders (also known as garnishee orders, which allow creditors to dock debtors’ salaries and wages directly from their employers) are back in the spotlight with a David-versus-Goliath case that is expected to be heard in the Western Cape High Court in August '20.
The case has been brought by Stellenbosch University Law Clinic and Summit Financial Partners and 10 clients, who are seeking clarity on the interpretation of the “in duplum” rule and what charges are allowed to accrue to debtors’ accounts. The applicants hope to put an end to reckless debt collection, which is causing widespread misery, particularly in poorer communities.
The exhaustive application includes 49 respondents, including the Department of Trade and Industry, the National Credit Regulator, all the banks, Bayport Financial Services, the Finbond Group, the Debt Collectors Council, Foschini, Edcon, Lewis, various law societies and law firms.
Bayport Financial Services is cited for credit agreements with two of the clinic’s clients: one, a farm labourer, alleges in his supporting affidavit to the application that he was given a loan of R16000 in 2010, paid back an amount in excess of R31500 and, according to Bayport, still owes more than R37000. This means he is expected to repay more than R68500 to service his initial R16000 loan. His salary had been garnished for more than three years, with R917.81 deducted from his R2247.26 salary every month.
In its replying affidavits, Bayport say it is fully within its rights to collect amounts approaching R65000 on the R16000 loan. It admits it has already collected more than R32500 from the debtor, and that “(his) account remains active, and Bayport will continue to enforce its contractual rights until the outstanding debt is recovered in accordance with the law”.
Bayport further admits it made an “error” in the second matter that has been brought to court and has “written off” the R7400 that was still being collected prior to the case.
In their reply, the applicants state they are “shocked” that Bayport feels justified in collecting amounts so disproportionate to the original loan, because this illustrates “Bayport’s ignorance of the spirit and aims of the NCA (National Credit Act)”.
The in duplum rule is a common-law rule that’s been on our books since the 1830s and has entered the public domain in recent years largely because of the behaviour of predatory debt collectors, who have added interest upon interest on debts, and lumped handsome collection fees on top of that. The rule means that the interest accrued on a debt ceases once it equals the original principal debt. For example: the total debt may not exceed double the original debt. So if you took a loan of R1000 that falls within the ambit of the NCA, the interest and collection charges should cease to run once R2000 is reached. In theory, that is. But any payment made by the debtor after the cap has been reached means interest will again start to accrue on the principal amount.
In 2005, with the promulgation of the NCA, the rule’s ambit was widened.
The NCA provides that, despite any common-law provision or wording in a credit agreement to the contrary, the amounts that accrue while the consumer is in default under the agreement may not exceed the unpaid balance of the principal debt at the time that the default occurs. The common-law in duplum rule was limited to arrear interest only. But section 103(5) of the Act widened its application to encompass all costs - including initiation fees, collection costs, credit insurance and administration charges - plus interest.
The statutory rule also applies over the period of the default, meaning a credit provider is not allowed to apply any further charges or interest - even though the debtor is making repayments - and whatever the manner of collection, including attorneys’ fees. This favours the debtor, not the creditor, but some creditors and collectors have interpreted the in duplum rule to their benefit - charging as much as they please and causing widespread debtor hardship, because the recovered debt is many times the original amount.
The situation was perfectly summed up in a 2016 case involving furniture retailer Lewis, which shamelessly ripped off a 60-year-old gardener. It had charged him R17955 over three years for a washing machine that cost R5999. In the Stellenbosch University Law Clinic case, the banks, represented by the Banking Association of South Africa (Basa), claim they are within their rights to charge collection fees, which include service, tracing, administration and legal fees - even after these costs far exceed the in duplum limit. And that, because there is no consistency among the banks in terms of how they recover debts, in duplum applies only before judgment is obtained.
Basa says if legal costs are counted as part of “collection fees”, its members’ recovery efforts will be hamstrung. And a consumer will have “no incentive whatever to pay what he pays under the credit agreement”.
Available economic activity data has shown that the economy ended last year on a weaker footing, with December retail sales figures being the latest to disappoint, declining for the first time in nearly two years. Statistics South Africa said yesterday that retail sales declined 1.4 percent on a yearly basis in December – the first decline in retail trade since February 2017. StatsSA said that on a monthly basis, retail sales slumped 4.8 percent, the most since May 2011. Lower sales were recorded for clothing, textiles, food, beverages and tobacco.
FNB economist Siphamandla Mkhwanazi said despite the weak December figure, he expected a moderate positive contribution to the fourth quarter gross domestic product. Looking ahead we expect the combination of a sharp decline in the December and January petrol price and the gradually increasing credit take-up by consumers (particularly unsecured credit) to support retail sales in the coming months.
The value of the U.S. dollar remains strong against the Euro, the British pound, the Chinese Yuan, and the world. Over the past year, since the end of January 2018, the U.S. Dollar index (DXY) has risen from just over 89.00 to close at just over 97.00.
It now takes only $1.1278 to acquire one Euro where, last year, it took just over $1.2500 to buy one Euro. One British pound, last year, cost $1.4264 whereas yesterday one pound cost around $1.2850. Last year, it took a little less than 6.2700 Chinese Yuan to buy one U.S. dollar. Yesterday, it took close to 6.8000 Yuan to buy a dollar.
We could go further, but these data seem to tell a good part of the story…
Banks may make it harder for consumers to get car loans, credit cards and personal loans under proposed rules from the corporate regulator. After the royal commission put bank lending practices under the microscope, adding to pressure from regulators, the Australian Securities and Investments Commission last week issued a consultation paper on responsible lending, which reiterated some of its concerns about how customers' living expenses were assessed by banks.
In response to the paper, which will be followed by consultation with banks over the coming months, some banking analysts predicted certain types of consumer credit could be tightened. At the same time, however, they said there could be benefits for the big banks, because the new rules are expected to force smaller non-bank lenders to tighten their processes, similar to what banks have already done over recent years.
Food for Thought
Remember the advantage you had yesterday, it has been replaced by the trends of today and more so that of tomorrow. You don’t have to do anything wrong. Your competitors might just catch the wave and do it right, then you will lose out and fail - nobody wants to be in that position.