Guiding consumers since 2009

Be warned of the debt trap

By Staff Writer

According to data from Statistics South Africa, employment contracted by 1.3% or 171 000 jobs between the fourth quarter of 2009 and the first quarter of 2010. The year on year picture, shows that 833 000 jobs have been lost over the past year.

According to the National Credit Regulator's statistics, there are over 18 million credit active consumers, of these, 45% have impaired records. A consumer is classified as having an impaired record if he/she has three or more payments in arrears, or has an "adverse listing", or a record that reflects a judgment or an administration order.

To date in excess of 170 000 consumers have applied for debt counselling. The scenario therefore is set for employees to exercise extra caution about how they handle their finances.

It is definitely time to settle old debts, drastically reduce new ones, and control budgets with a firm hand.

"Both employees and their employers should be concentrating on a combined effort of promoting wise financial management," stresses Peter Setou, Senior Manager: Education and Strategy at the National Credit Regulator (NCR).

"The NCR is continually educating and informing consumers/employees on the role of the National Credit Regulator, objectives of the National Credit Act, consumer rights under the NCA, debt counselling, credit bureaux, budgeting, dealing with over-indebtedness etc. However, our success will be limited if there is no active support and participation from both employers and their staff."

Setou strongly advises employers to include educational programmes on managing finances and dealing with over-indebtedness into their organisations' wellness programmes.

Employees are also urged to make use of these services offered by employers.

"It is common knowledge that stress-related illnesses have a markedly negative impact on productivity, therefore employers should assume the responsibility of advising their employees on where they can obtain assistance. When, for example, employers note a rising incidence of garnishee orders within the organisation, they should take proactive steps to point employees in the right direction for advice and counselling."

Employees who already find themselves in a position where money available after payment of essential expenses is not enough to pay all other debts must act immediately because the chances are that they may be over-indebted. The first step is to approach their credit providers and negotiate lower instalments. In most cases credit providers are willing to assist. If this fails they need to contact a registered debt counsellor.

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