The credit information amnesty implemented on 1 April 2014, has left many South African consumers confused about what the credit amnesty means for them.
18 December 2013
In South Africa, the extremely high levels of debt and over-indebtedness are worsening at a worrying rate. As evident in The FinScope 2013 South African Survey results, the number of South African consumers with unsecured loans has doubled in the last year alone and more than a third of the total 14.2 million South African adult credit active consumers show one or more signs of over-indebtedness.
Several factors such as increasing interest rates, reckless lending, unsustainable increase in payday loans, the economic slowdown following on from the 2008 global financial crisis and increased tariffs due to rising fuel, electricity, water and materials prices, all continue to erode consumers spending power and aggravate the consumers lack of affordability.
Ian Wason, DebtBusters CEO, states “something drastic and urgent needs to be done to protect South African consumers and to reduce the risk of over-indebtedness. 2014 may be too late to implement the right preventative steps. Setting affordability criteria for credit providers to adhere to when granting credit and implementing norms and standards for emolument attachment and garnishee orders issued for credit, will not be enough to render the debt crisis South Africa is burdened with. The government rhetoric is too little too late, as for over 5 million consumers, the horse has already bolted. In addition, the political pressures of the 2014 elections in South Africa will only cause further financial turmoil.”
“DebtBusters has experienced 85% year on year growth in the amount of debt counselling applications, and including applications to Consumer Debt Help, Intelligent Debt Managements low income division, this puts growth above 100%. I do not believe what is being said by some credit providers that the worst is over. Historically a spike in personal loan defaults precipitates a spike in nonperforming loans and other lending products. I think the worst is still to come,” said Wason.
Ian Wason cautions South African consumers “to avoid a debt funded festive season spending spree and remember your 2014 financial responsibilities. Don’t become burdened with a festive season financial hangover and carefully monitor credit expenditure and encourage responsible spending habits. In January every year, DebtBusters receives double the amount of their average monthly enquiries, as consumers begin to fall behind on their debt repayments over the festive season.”
Wason also states, “Ignoring your debt problems will not make your financial difficulties disappear. If you are burdened with debt, take responsibility for your finances and seek assistance before you reach the end of your credit line.”
The debt counselling process has changed drastically over the last few years and therefore the difference between good and bad debt counsellors has widened considerably. Be careful of who you apply for debt counselling with.
“With 70% of DebtBusters staff employed in collating the correct information, negotiating reduced fees and interest rates with credit providers, and providing ongoing customer service to our existing client base, unfortunately we are an exception in the industry. The majority of debt counsellors do not negotiate with credit providers or provide adequate customer service. With only 500 of the 2500 registered debt counsellors still operating, it is terrifying to think of how many consumers have not been helped to financial freedom,” states Wason.
Ian Wason adds “DebtBusters will save the clients that applied in November 2013, R133 million collectively on interest and fees over their entire debt counselling period. We also receive continuous praise from the magistrate’s courts for always successfully negotiating lower interest rates on behalf of South African consumers with their credit providers. Ensure that you choose the right debt counsellor first time around, as credit providers are reluctant to restructure interest rates and debt repayment terms, twice.”
By Kelli Knutsen