The National Debt Mediation Association (NDMA) called for a new approach to combat consumer’s over-indebtedness this week adding that a large portion of credit-active consumers having impaired credit records.
According to the latest Consumer Credit Market and Credit Bureau Monitor reports of the National Credit Regulator (NCR) of 76.5 million accounts, 12 million or 18% are three or more instalments behind and 50.7 million or 74% are in good standing.
While 9 million consumers have impaired records, not all these consumers are necessarily over-indebted. About 6.2 million of these have a combination of some impaired and unimpaired accounts as well as some adverse listings. “It is these consumers that have a better chance of rehabilitation if they act in time,” said NDMA CEO, Magauta Mphahlele.
Of the 6.2 million consumers with impaired records, 2.3 million have an adverse listing which means that their account has been handed over to the legal department for collection or the debt has been written off and possibly sold to third parties for collection.
However, 3.8 million are three and more months behind with their accounts leaving them exposed to legal action and receiving section 129 notices. The NDMA warned that if these notices are not addressed within 10 business days of delivery they will be followed by a summons to appear in court and then judgment. Judgements allow the credit provider the right to auction, repossess or garnishee a consumer’s salary.
“One of the problems is that consumers are not aware that if they do not take up the options outlined in the section 129 notice their chances of redress become limited and more expensive,” says Mphahlele. “The sooner they communicate with their credit providers or approach the NDMA for advice, the better.”
She added that consumers should be provided with a range of effective and cheaper options in the credit market to help them get over their debt. The NDMA is, with the support of the banking industry and other credit providers, set to find ways of reducing the cost and complexity of rehabilitating over-indebted consumers. This will entail making credit providers more approachable and consumer friendly as well as alleviating the burden on the courts.
She added that the high rate of borrowing, coupled with a general slow-down in the economy, increased cost of living and unavoidable life events such as sickness, death and divorce has hit some consumers’ pockets.
“When you start borrowing to pay off other creditors or to cover basic costs such as food, utilities as well as rates and taxes, it should sound the alarm bell,” says Mphahlele. “It takes just one month of unpaid bills to start slipping into serious arrears and to become vulnerable to legal action. It is then much more difficult to negotiate restructuring your repayments with your credit provider.”