‘Ten million people battling to repay loans’

Nicolette Dirk

THE increase in over-indebted consumers has become a serious concern the Department of Trade and Industry (DTI) aims to tackle head on.

During his address at the Barclays Consumer Conference yesterday in Cape Town, Trade and Industry Minister Rob Davies said despite a notable fuel price decrease last month, a significant number of South Africans remained over-indebted.

“Consumers are lured into taking more credit through misleading adverts that prey on desperate and vulnerable poor people. These challenges must be confronted head on through various strategies, including the implementation of various regulatory reforms,” he said.

Davies said DTI’s research showed some credit providers were either not doing affordability tests at all, or not doing them properly.

To address the problem of over-indebtedness, government developed an affordability assessment regulation to provide more rigid rules for credit providers.

The regulation was to be implemented on March 13, but Davies’ department suspended it until September 13.

DTI’s director of credit law and policy Siphamandla Kukani said credit providers approached the department to ask for more time because their IT systems were not yet compliant with the new assessment structure.

The DTI, along with the National Credit Regulator (NCR), agreed to give a further six-month extension before enforcing the process.

Kukani said by September 14 the regulation will be implemented. During the six-month window period, he said, the DTI and the NCR would monitor credit providers to prevent any reckless lending.

In the past there was no standard procedure when it came to assessing consumers’ ability to borrow money.

“There was no proper disclosure required of a consumer’s ability to pay back a loan because not enough questions were asked before it was approved. Reckless lending was also one of the problems when it came to borrowing.”

With the new regulation the NCR can investigate such cases and refer them to the National Consumer Tribunal instead of having to go to court.

Debt Counsellors Association of South Africa (DCASA) president Paul Slot said there were currently no fewer than 10 million people battling to repay loans.

DebtBusters chairman Ian Wason added that currently 1.1 million South Africans made high interest loans.

nicolette.dirk@inl.co.za