By Abdul Milazi, Sunday Times
Despite reports that the number of people being taken to court by banks and credit providers for not paying their debts is slowing down, it is estimated that about 70000 people are facing legal action every month because they are in arrears.
The National Credit Regulator's (NCR) credit bureau records for 2007 show that 62.3% of the 16.9million credit-active consumers were classified as "in good standing", while 37.7% had bad credit and 15.7% had missed one or two instalments.
According to Paul Beadle, the managing director of www.justmoney.co.za, consumers wait too long to tackle their debt problems and should seek the help of a debt counsellor as soon as they can't meet their monthly repayments.
Debt counsellors say the biggest problem they face is that consumers have no clue what debt counselling is and often mistake it for another system which can help them get more loans.
Beadle said: "The number of people applying for debt counselling via the website is increasing, but often it's as a result of being declined for other types of lending, such as a new credit card or a personal loan."
Click here to find out about debt counselling
Or click here to find out about the six steps to debt counselling
Consumers are trying to tackle their problems by taking out even more debt, which is just making matters worse, he added.
Zamokwakhe Ntuli, a debt counsellor with Golden Touch Trading in Durban, said: "After being declined by banks and other lenders, people come to us and ask if we can help them get more credit.
"When we explain what we do, most walk out.
"The other problem is that people are reluctant to go for debt counselling until they are referred by their creditors."
DebtBusters.co.za, one of SA's biggest debt counsellors, said it dealt with about 100 new clients each month.
Its managing director, Luke Hirst, said debt counselling was a solution for consumers, but added that they should also change the way they managed their money.
"Debt counselling is a last chance to avoid sequestration, but if clients fail to maintain their revised debt plan, or they go out and get more credit, then they will lose their debt review status and the lenders to which they owe money will be able to proceed with legal action to reclaim all outstanding debts," he said.
Ntuli said the desire to keep up appearances was also a problem in getting people to go for counselling. " It seems there is some kind of stigma associated with debt counselling," he said.
Priscilla Moonsamy, a debt counsellor at Debt Management Solutions in Johannesburg, said she had 290 clients on her books and was getting about 10 inquiries a day.
"People are reckless in obtaining credit, but banks and other lenders are equally reckless.
"Most of the clients I see are people who had credit long before the National Credit Act (NCA) was introduced so their debts cannot be cancelled - even if there is proof of reckless lending by creditors," said Moonsamy.
Madoda Siqaza, a debt counsellor at Masi Personal Debt Solutions in Johannesburg, said middle-income earners were the hardest hit, and the NCA came a bit late, after the situation had already deteriorated.
All debt counsellors who spoke to Business Times Money said there was a great need for the NCR to run a visible national education campaign on debt counselling.