Credit consumer’s slippery slope into debt

28 November 2012

From Business Day
by Michael Bleby
Writer at Large

KAY Moyo is one of about 6000 South African consumers undergoing debt counselling.

She took the leap this month after getting herself into debt worth R100000 despite her work ing as a credit vetting officer.

Moyo, not her real name, got her first line of credit, a Truworths account, in 2004 after getting temporary employment at a cellphone company. Then came two accounts at clothing retailer Ackermans .

“I couldn’t afford cash. Since I was creditworthy, I opened up accounts for my two kids,” the 29-year-old says.

The next year she became a permanent employee and, armed with a payslip and three months’ bank statements, was able to command more debt. She bought a sofa from furniture retailer Morkels.

Her employer gave Moyo two cellphone accounts, one for her and another for her mother in Klerksdorp, who was taking care of her two young children during the week.

In 2006, Moyo got married. Her husband paid the R2000 rent on their Hillbrow home.

“Every time you open an account, you see you need something more,” she says. “When I thought I have somebody who can help me with my debt , I can have more debt. I opened an FNB credit card account.”

She then applied for a personal loan with Nedbank, to renovate her mother’s house .

That application was slow to process, so she also applied for a separate one with FNB. Both were approved, and almost on the same day R15000 from Nedbank and R8000 from FNB dropped into her account.

By now Moyo had a third child. She needed a car, as she could not rely on taxis to get to her mother’s home in North West. She bought a Toyota Tazz in August last year , with a WesBank loan for R83000. Then things became difficult. “My problems started last year, after buying the car. I fought with my husband and we separated. Everything was on my name.”

At the time, Moyo was only clearing R6400. She had monthly repayments of R5188 and household commitments, including rent, of R4800. She started working weekends to make extra money, cutting time with her children, by then aged nine, four and three.

It was stressful and hardly lucrative, as overtime work is heavily taxed.

“When you work a full weekend at the end of the month, SARS (South African Revenue Service) will come and take that money. On Sundays I made R500, but SARS takes half.”

By the end of last year, she was in deep trouble. “They were calling me each day: Nedbank, FNB — ‘When are you coming to pay?’ I didn’t have money to pay.”

Moyo is representative of the largest group of debtors identified in National Credit Regulator data yesterday.

People earning between R3500 and R7500 a month account for 44,6% of SA’s 16,9-million credit consumers.

This group showed the largest deterioration in creditworthiness between the second and third quarters of last year.

Individuals seen as being in “good standing” — those up to date with payments and who have not missed more than two instalments on any account — declined as a proportion of this income band from 61% to 56,9%. Those with an “impaired record” — payments later than three months, adverse credit listings, judgments and administration orders — rose from 39% to 43,1%.

“It is the middle income group whose credit standing has got worse,” says National Credit Regulator Gabriel Davel.

Moyo found out about the debt review process through work. Her job is to capture information from customers on the company’s computer system and inform them whether their credit application has been approved or declined.

One day, a service provider came to install new debt- management software. The supplier explained to Moyo how the system flagged up problematic customers.

“This one here is on debt review,” she told Moyo, who had never heard the term. The National Credit Regulator put her in touch with a registered debt counsellor.

Under debt review, all access to credit is frozen while a debt counsellor renegotiates terms of payment with creditors.

This generally means agreeing with the creditors to extend the period for repayment. Moyo’s two personal loans have repayment periods of 24 months and a debt counsellor would typically extend this to 36 months.

Moyo’s renegotiation has not been concluded yet, but she is hopeful it will be soon.

“To my view, this thing has almost been solved. After this I don’t want debts any more.”

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