Credit providers prey on blacklisted consumers

Johannesburg – It is very important for banks, and especially banks who operated in the unsecured lending space, to educate users of their financial products in order to mitigate the escalating debt crisis.
Speaking at the FinScope South Africa 2013 presentation in Johannesburg, Neil Roets, CEO of Debt Rescue said it was clearly evident from the statistics released by the Finmark Trust in their latest consumer survey that the number of consumers using some form of credit had escalated from 12.8-million last year to 15.5-million at present.

“At the same time, it was evident from the FinScope survey that there had been virtually no increase in the disposable income of South Africans.

“What is disturbing is the fact that a growing number of credit grantors are lending to people who have already been blacklisted knowing full-well that they are exacerbating their situation,” said Roets.

In his opening remarks, Cas Coovadia, managing director of the Banking Association of South Africa and chairperson of the Finmark Trust, said there was a lack of financial literacy among many poorer South Africans and that more needed to be done to more fully inform them of how the banking system functioned.

He bemoaned the fact that South Africans did not have a savings culture leading to the fact that many lived a hand-to-mouth existence.

Keynote speaker Crispin Son, who is the MD of the Mass Foundation Cluster of Old Mutual, said South Africa was the most unequal society in the world, but that “tremendous progress” was being made.

“The financial sector is playing a very important role in reducing poverty,” he said.

Roets pointed out that far too many South Africans in especially the deep rural areas were wholly uniformed of the protection measures available to them under the terms of the National Credit Act.

“We know from experience as debt counsellors that relatively few people are aware of the fact that if it can be proved that a credit provider provided a loan when the lender was already over-extended and it can be proved that he acted recklessly, that loan is null and void.”

He said banks and other financial institutions extending unsecured loans were often guilty of not providing their customers with the full facts of how interest would mount up and the steps that would be taken against them in the event of non-payment.

“A good many lenders only become aware of their predicament when money is deducted from their account through a garnishee order.” Roets said.

Some of the other findings of the survey were that more people had access to services such a water and electricity. More than one million South Africans still did not have access to clean water, while the number who had to cope without electricity stood at 3.3 million.

According to the survey, 9.8-million consumers were caught in what it termed “the indebtedness trap”.

“People that are over indebted tend to be women over the age of 30 and are likely to earn a monthly income of between R1 000 and R7 999, the survey found.

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