The highly controversial debt relief hill has pushed hope into the arms of over-indebted low-income earners and the unemployed. Nevertheless, consumers shouldn’t celebrate too soon. The bill may cause severe consequences for the working class…
South African’s have been struggling for a while to keep their heads above water. With rising unemployment rates, the continuous cost of living increasing and highly uncertain economic conditions, it’s no surprise that consumers have been using debt to make ends meet every month. Although debt counselling is a viable and highly successful option for struggling over-indebted consumers, it cannot, unfortunately, cater to those who are unemployed.
The debt relief bill was introduced to help relieve low earning and unemployed consumers with their unsecured debt. The debt relief bill has formally given power to the NCR to write off debt. It may be a while before the implementation of this act can take place though, as the NCR is currently not equipped to deal with the processes it will have to cater for.
The bill was first briefed as a Debt Forgiveness program in 2016 and has since then been largely criticised by the Banking Association of South Africa and the Democratic Alliance.
It appears that the new legislation is still highly misunderstood by consumers. With its sign off by president Cyril Rhamaphosa on the 13th of August, consumers everywhere are desperately hoping to get their debt written off. However, the new legislation will only take effect after all other measures have been exhausted. The new debt relief bill has created a false sense of hope for low earners.
Consumers who earn more than R7 500 per month and have unsecured debt above R50 000, will not be eligible. The bill will not be a beacon of light for the over-indebted working class. Instead, it’s predicted to cause havoc for lower-income groups when it comes to getting credit. And if they do, they will be heavily charged on interest and fees. In fact, several banks have already begun changing their lending criteria so that many lower-earning consumers will not have access to credit. This will cause a massive long-term implication with consumers resorting to unregulated credit providers to make ends meet.
“However, the new legislation will only take effect after all other measures have been exhausted. The new debt relief bill has created a false sense of hope for low earners.”
- Neil Roets, CEO. Debt Rescue