Guiding consumers since 2009

South Africans in desperate need of debt counselling

By Staff Writer
Nicolette Dirk, finance writer, Justmoney.co.za
 
With the rising cost of petrol and food, even more indebted South Africans need debt counselling to get by. Currently, DebtBusters has more than 15 000 clients under debt management and are getting three times the amount of monthly applications for debt counselling compared to 2008/9.
 
Dean Randall, debt negotiating manager at DebtBusters, said January is normally a bad month for most consumers and this can explain the influx of people needing debt counselling. But new costs like the E-tolling system in Johannesburg and South Africa’s exchange rate taking a dip, has put consumers under even further financial pressure.
 
“The E-tolling payments accounts for about 8% of the overall expenses for people in Johannesburg now have to pay. With the exchange rate dropping, petrol, food and the general cost of living will also go up. And companies cannot afford to give people increases at this point. That is why many consumers will opt got getting a loan,” said Randall.
 
DebtBusters clients, on average, spend most of their net income on debt. Randall said that such desperate debt situations caused the Marikana miners’ frustrations. Two years ago the Marikana miners went on strike, in demand of higher wages. The confrontation between strikers and police resulted in the death of 44 people.
 
Randall said many of the Marikana strikers resorted to demanding more money from their employers because most of them were not able to service the incurring debt racked up by multiple lenders. 
 
“When some people are feeling trapped in debt their anger is misplaced at their employer, who often cannot afford to pay them more,” said Randall.
 
He added that many people are in the debt cycle where they borrow from one lender to pay off another. When their credit is too high and providers start refusing their requests, they go for the last resorts, like pay day loans. With pay day loans, consumers can be charged the maximum rate of 60% on the amount they borrow.
 
Light at the end of the debt tunnel
 
Paul Slot, president of the Debt Counsellors Association of South Africa said the ability of consumers to do something about their indebtness will be improved by the amendment of Section 129 aimed at allowing a consumer to consult with a debt counsellor when they receive a letter of demand from a credit provider. He added that this will re-introduce the original intent of the National Credit Act (NCA) to allow a consumer to restructure debt without fear of legal action.
 
“The second amendment that is critical for consumers is an amendment of the NCA that will disallow untimely termination of debt review by credit providers. Currently many credit providers terminate credit agreements from debt review after just 60 days, which makes it difficult to implement the restructuring of debt as proposed in the NCA.

The exploitation of terminations by credit providers is pandemic and this situation will be addressed with the proposed addendum,” he said.
 
Randall added that government should also look into subsidising aspects of debt management and advertise debt counselling at places that provide credit.

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