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28 November 2012
February 18, 2007 Edition 1
Three months before new credit laws aimed at curbing reckless lending come into effect, debt-laden South Africans are struggling to keep up with bond repayments, car installments and credit card bills as interest rates start to bite.
The National Credit Regulator last week began training debt counsellors so that they are ready for a flood of requests for help from cash-strapped consumers when the National Credit Act comes into effect on June 1.
“We expect to see an increase in the number of indebted consumers who are stressed over the next few months,” said Gabriel Davel, the national credit regulator.
He said a study conducted by his office indicated that the debt levels of South Africans had risen over the past six months. “We have a number of cases we are looking at, not just credit cards. We are worried about vehicle contracts with large residual values – for example after five years one still owes as much as 60%of a vehicle,” he said.
Davel said his office would be researching debt and defaulting patterns. “In recent times we’ve seen more competitive marketing for consumer credit than ever in the country, but when consumers battle to pay, credit providers rush to courts expecting the state to help them get back their money,” he said.
Davel said as many as 500 debt counsellors would be required to handle complaints when the credit laws come into effect.
Consumers can apply for help under which their debts can be frozen and restructured if, in terms of the regulations, it is established the loans were granted recklessly. South Africans use up to 70% of their salary on servicing debt.
Statistics South Africa said the number of summonses for debt have shown a rising trend since 2005.
The August 2006 figure at 123 834 was 47.9% higher than the December 2005 low of 83 717. This trend has been confirmed by the September and November data which showed the number of summonses rising to 147 166 and 154 912 respectively.