Pretoria – Getting a phone call from a sales consultant offering a new “affordable” cellphone contract or something similar is guaranteed almost every week.
The same goes for text messages offering personal loans. Even when the receiver is not interested, the consultants hardly ever take “no” for an answer.
Minister of Trade and Industry Rob Davies said consumers were continuously lured and enticed into taking more credit through misleading adverts that preyed on desperate and vulnerable poor people.
He was speaking at the Barclays Consumer Conference in Cape Town.
“Research commissioned by the Department of Trade and Industry showed that some credit providers were not doing affordability tests.
“And in respect of those that were doing them, they were not done properly or consistently. In fact, credit providers tended to overlook affordability tests and just extend credit biased on listing information on the credit bureau,” Davies said.
“South African consumers are still experiencing high levels of indebtedness that have left a lot with impaired credit records and difficulty accessing credit.”
He also appealed to credit providers to stop extending credit recklessly and without conducting proper affordability tests.
Neil Roets, chief executive of Debt Rescue, said there were several things people should be cautious about to avoid falling into the debt trap. “Set up a budget, taking into account your income, expenses and credit agreements. Once you have this budget, stick to it as closely as possible,” Roets said.
Roets also said people should check their bank statements for hidden expenses such as old cellphone or gym contracts that were no longer in use and also avoid credit spending unless it is unless it is an emergency.
“Be realistic about what you need to live on monthly. If you cut your spending too thin to enable you to qualify for credit, you might struggle to deal with unplanned emergencies such as medical expenses or a vehicle service.”
He said people often found themselves applying for debt review because of increased cost of living, job losses, new jobs that pay less, having to support extended family who could support themselves, medical benefits that had run out, and the cost of paying for treatment.
Those in serious debt can consider debt counselling where people will be helped to manage their debt and pay off their creditors.
The implementation of the affordability assessment, which Davies postponed from March, will come into effect on Monday.
The new regulations will make it stricter for creditors who are lax when it comes to affordability tests before lending.