Affordability regulations, responsible lending practices, and early intervention in financially distressed accounts are set to become key enforcement priorities for the National Credit Regulator (NCR) as pressure mounts on consumers in a volatile economic environment.
Pressure building inside household budgets
The discussion repeatedly returned to growing pressure on household finances, particularly as consumers stretch repayment terms to lower monthly instalments.
Annaline van der Poel, chief partnership officer at Debt Rescue, said the industry has seen a significant shift towards much longer repayment periods.
“Ten years ago, the average repayment term, for example, for a vehicle was 60 months,” she said. “Seeing a 72-month or 80- to 84-month term now, it’s very common.”
According to Van der Poel, the move towards longer repayment terms may improve affordability on paper, but it substantially increases the long-term cost of credit while exposing consumers to depreciation risk.
Both speakers emphasised that consumers often focus almost exclusively on achieving a lower monthly instalment, without fully appreciating the long-term cost implications of extended repayment terms or balloon structures.
Van der Poel said consumers do not always fully understand the impact of balloon payments and residual values at the end of finance agreements.
“If you have a balloon payment, can you afford to pay that balloon payment?” Van der Poel asked. “How does a balloon payment work? Do you understand the intricacies of it?”
She said many consumers focus primarily on the monthly instalment rather than the total cost of ownership, future maintenance costs, insurance obligations, and vehicle depreciation.
Affordability assessments under pressure
Van der Poel argued that affordability calculations in the vehicle finance sector still require deeper interrogation of consumers’ living costs and financial obligations.
She said dealerships and F&I managers should move beyond minimum compliance requirements by asking more detailed questions about household composition, dependants, and extended family responsibilities.
“How many people are in your household? How many people are you taking care of?” she said.
Those factors, she noted, materially affect transport, food, and living expenses, which in turn influence long-term affordability.
Van der Poel also encouraged lenders and dealers to conduct “stress tests” during affordability assessments to determine whether consumers would still cope if interest rates increased by one, two, or three percentage points.
Comprehensive insurance obligations should similarly be factored into affordability calculations upfront rather than addressed only after finance approval.
“Have you factored that in? Have you gotten quotes?” she asked. “Let’s put that into the budget as well.”
Early warning signs of distress
Van der Poel said lenders already possess valuable behavioural indicators that could help to identify financial distress before accounts formally default.
She pointed to consumers repeatedly changing debit order dates, reversing debit orders, and making delayed manual payments as potential warning signs of underlying cash flow pressure.
“If you see a consumer who is starting to change, for example, his payment date quite frequently,” she said, lenders should investigate the reasons behind the behaviour.
According to Van der Poel, those patterns may indicate that consumers are prioritising other expenses ahead of vehicle repayments.
She said lenders should monitor broader trends within their collections books, particularly during periods of rising interest rates and economic stress, and proactively consider assistance or intervention strategies before defaults escalate.
Debt counselling and early intervention
Van der Poel described debt counselling as one of the National Credit Act’s most important consumer protection mechanisms for over-indebted borrowers.
She said earlier intervention remains critical because debt counsellors can assist consumers before legal enforcement action begins, but their options become significantly more limited once litigation has started.
“Taking the help and the action when you realise it and not wait until the legal action has been taken is such a critical part of finding that solution,” she said.
According to Van der Poel, credit providers should more actively guide financially distressed consumers towards debt counselling before repossession becomes unavoidable.
Repossession often still leaves consumers liable for shortfalls after vehicles are sold, she warned.
“There’s very likely going to be a shortfall, which they are still going to be liable for,” she said.
Reckless lending remains under scrutiny
Reckless lending remains a major regulatory concern, although the industry has materially improved over the past decade.
Van der Poel said the NCA contains extensive protections and penalties aimed at preventing reckless credit extension.
“It’s not something that’s taken lightly,” she said.
The reputational and financial consequences for institutions found guilty of reckless lending have pushed lenders towards far stricter compliance processes, she added.
Dealers urged to prioritise transparency
Van der Poel said dealerships can improve outcomes by discussing realistic budgets upfront and presenting customers with multiple vehicle options within different pricing bands before finance applications are submitted.
Rather than focusing only on a single vehicle choice, she said dealerships should help consumers understand the alternatives available to them, what different vehicles offer, and how those options align with their budgets.
Rather than structuring deals purely around maximum affordability limits, Van der Poel encouraged dealerships to proactively reposition consumers towards alternative vehicles that better align with realistic long-term affordability.
“Understanding what your consumer wants already gives you a lot of a nice opportunity to prepare for the possibility that they could be declined,” she said.
According to Van der Poel, consumers are more likely to make sustainable financing decisions when they understand the trade-offs between affordability, features, long-term costs, and monthly repayments.
She added that consumers should receive clearer explanations around long-term ownership costs, including service plans, future maintenance expenses, and insurance obligations.