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Thousands of over-indebted people were flooding debt counsellors with applications for debt review as the effect of higher interest rates and high food, electricity and petrol prices bit deeply into household income, the National Credit Regulator said this week.
Debt counselling project manager Mpho Tshepo said 7 000 people had been accepted for debt review since the National Credit Act had been enforced on June 1, 2007 - and this number was growing daily.
"These days it's bad news because we used to get about 300 applications a month for debt review, but since mid-April the numbers have risen to between 150 and 200 applications a day. It's scary," he said.
Tshepo said creditors were more amicable than in the past and keen to negotiate with debtors to retain the customer relationship. He said the protective effect of the Credit Act was being felt by debtors and creditors alike.
During March there were 51 971 civil judgments for debt amounting to R483,8-million
"Creditors know that if people go for debt counselling they can't obtain more credit until their existing debts are paid up. They want their customers to be able to qualify for more credit, so they want them to repay their debt.
"They are less keen to go for debt judgments because if a consumer defaults, after 90 days the creditor has to issue them with a section 129 notice, which draws the attention of a debt counsellor and they can only take legal action if there is no action from the consumer after 20 days.," Tshepo said.
Statistics SA figures have confirmed the downward trend in debt judgments, showing the number of civil summonses issued for debt has decreased 14.6 percent, while the number of judgments for civil debt decreased 7.9 percent for the first quarter of 2008 compared to the same period last year. During March there were 51 971 civil judgments for debt amounting to R483,8-million, which was 1 percent lower in value than in March 2007.
Tshepo said debt counselling was a temporary lifeline for over-indebted people to keep repossession of property at bay.
"The number of houses and vehicles being repossessed is going up and people are being driven to the edge. If consumers are mortgage-stressed, the debt can be extended for another 20 years from the time of applying for debt review (or to the creditor), vehicle agreements can be extended from 48 months to 84 months and credit card repayment periods for a further 60 months.
'They must approach their credit provider because they are willing to assist'
"People should not panic, but they must not sit back. They must approach their credit provider because they are willing to assist," Tshepo said.
Johannesburg debt counsellor Paul Slot said his company's five offices around the country were each receiving 100 to 200 calls a month from people seeking counselling, some close to suicide.
"The average person who comes to us for help has about 13 credit cards and they use one card to pay off the others. The most I have seen is one person who had 30 credit cards," Slot said.
