They’re unscrupulous, dishing out loans to blacklisted consumers with no affordability checks and exorbitant interest
THE National Credit Regulator (NCR) will beef up the fight against unscrupulous loan sharks who are dishing out loans to blacklisted consumers without doing any affordability checks and charging exorbitant interest rates.
These illegal loans inevitably drive desperate consumers deeper into debt and pile on the misery.
A blacklist is a register of entities or people who are banned from taking out normal loans with accredited banks, usually because they are already in too much debt and are regarded as a risk by regular lenders.
The unscrupulous lenders take advantage of them, offering them enticing loans to “help them get out of debt”.
The lenders’ advertisements are often seen on lamp poles or at taxi ranks and bus stops. Typical wording reads: “No credit checks required, blacklisted consumers welcome, free credit.”
The NCR says the number of applications for credit decreased from 9.99 million in March to 9.95 million in June. The number of impaired accounts increased from 19.92 million to 20.24 million as of June this year.
Impaired means the consumer defaulted on repayments for more than three months.
“These adverts are illegal and contravene the National Credit Act (NCA). We still find a substantial number of these unlawful adverts of this kind, even in the mainstream media,” Jacqueline Peters, manager of investigations and enforcement at the NCR said.
Peters said consumers must be made aware of false and misleading advertising. The NCR is running an advertising campaign to raise awareness of this type of misleading advertising and educate consumers about credit-related adverts.
Nicky Mohan of Credit Ombuds said in most cases consumers are charged exorbitant interest and its only serves to sink them deeper into debt.
“For example, in terms of car finance, if consumers default for just one month, the car will be repossessed but the consumer will be still forced to pay the outstanding debt.”
Debt Rescue CEO Neil Roets said that South Africa was still battling high levels of reckless lending. He supported the initiative by the NCR to root out bad practitioners.