Guiding consumers since 2009

Retailers will grant less credit

By Staff Writer
Retailers are set to offer borrowers less credit thanks to new laws that have been recently passed. These laws have tightened up how credit providers conduct affordability assessments and commentators are predicting that as a result lenders won’t lend as much credit as often as before.

 

This could be a major problem for those who apply for credit on a regular basis to make ends meet., “Regardless of the decline, we anticipate a drastic decrease in the amount of credit granted by retailers for Q1 and Q2 2015. The new affordability tests will stop consumers who do not have the means to service their credit from slipping through the credit cracks, due to poor or lack of affordability assessments,” said Kelli Knutsen marketing manager of DebtBusters.

 

“With this in mind, credit applications and enquiries are expected to spiral out of control, as cash strapped consumers are likely to move from one credit provider to the next to apply for credit in hope that their application will be successful.”

 

The National Credit Amendment Act, published late last week, outlines the new regulations on the affordability assessments that credit providers should commence before they grant consumers credit. The aim of the affordability test is to protect consumers by preventing credit providers, including retailers, from lending out credit recklessly. 

 

Statistics on retailers and credit facilities in the Consumer Credit Market Report (CCMR) released by The National Credit Regular (NCR) for Q3 2014, reveals that over R16bn in credit facilities was granted for the quarter. (Credit facilities include revolving credit, term loans, overdrafts, and retail credit accounts.)

 

Furthermore, results on the gross debtors book for retailers amounted to over R35bn. Although this amount declined quarter-on-quarter, from Q2 2014 to Q3 2014, a further decrease is anticipated for Q4. 

 

Knutsen added, “Eighty-three percent of Debtbusters’ clients have retail accounts included under debt counselling and have an average of three retail accounts when signing up for the process. Moreover, DebtBusters’ clients with retail accounts have on average, an amount of R6,400 outstanding on these accounts. Prior to debt counselling, these clients were paying in excess of R1, 000 monthly towards their retail debt repayments.”

 

The National Credit Amendment Act fleshes out exactly what credit providers, including retailers, need to do before they grant credit. “With assessments enforced, ‘reckless borrowing’ an act conducted by many impoverished South African consumers desperate for a loan, will come to an end too. The days of endless borrowing and rolling credit to survive are no longer. Consumers are to take responsible steps needed to sort out their finances and should consider debt counselling,” says Knutsen. 

Recent Articles

Featured The newbies quick guide to tax season

Starting in September, the South African Revenue Service (SARS) kicks off tax season. But not everyone has experience in doing this. Every year, new employees and contractors enter the job market. So, what do these tax newbies need to know?

What’s the deal with underwriting?

When you apply for a long-term insurance policy, a financial adviser will ask some personal questions about your lifestyle, family history, health, and even ask you to take some medical tests. This process is called underwriting, but is it really necessary?

 

How are you taxed on your retrenchment package?

Unemployment is one of the biggest problems in South Africa. The emergence of the Covid-19 pandemic has exacerbated the situation with a lot of companies retrenching their employees.  When retrenched, you’ll receive a retrenchment package, but do you know how much tax you’re liable for?

Car repossessed – don’t be taken for a ride

When the country is facing an economic downturn, chances are your finances will feel the pinch. This can lead you to make bad financial decisions such as skipping your vehicle payments. But every decision has consequences and if you don’t pay your instalment, the bank will repossess your car. But what can you do when this happens?

 

Deals

50% discount on kids’ clothes at Keedo

Price: Available on request
When: Daily
Where: Nationwide

KFC Crunch Sliders for R29.90

Price: R29.90
When: Daily
Where: Nationwide

Bakwena Spa Women’s Day Special

Price: From R699
When: 8-10 August 2020
Where: Western Cape and Gauteng


Latest Guide

Guide to debt rehabilitation solutions