Guiding consumers since 2009

Credit life insurance will soon be cheaper

By Jessica Anne Wood

A cap on the maximum amount that can be charged for credit life insurance will soon be implemented. The National Credit Regulator (NCR) explained: “The changes aim to cap the costs charged to consumers in relation to credit life insurance.”

This follows a number of instances which made the news where stores were charging customers exorbitant credit life insurance fees, along with a slew of other overcharging allegations. The likes of the Lewis Group and Finbond have been involved in cases where they were accused of charging excessive credit life insurance charges.

In November 2015, draft credit life insurance regulations were released for public comment. These draft regulations proposed the following caps to credit life insurance charges:

Sub-sector

Maximum prescribed cost of credit life insurance (excluding the cost of credit)

Mortgage agreements

R2.00 per R1 000 of deferred amount

Credit facilities

R4.50 per R1 000 of deferred amount

Unsecured credit transaction

R4.50 per R1 000 of deferred amount

Short term credit transaction

R4.50 per R1 000 of deferred amount

Developmental credit agreements

R2.00 per R1 000 of deferred amount

Other credit agreements

R4.50 per R1 000 of deferred amount

Source: Draft credit life insurance regulations

These caps were implemented in May 2016, along with other caps to the maximum interest rate that could be charged on various loans. According to the NCR, these caps will curb excessive credit life insurance costs, as consumers will not be charged above the capped amount.

“There are some credit providers who are charging excessively, and we believe the regulation on credit life insurance is needed in order to stop these excessive charges,” stated the NCR.

It added that the published draft regulations capped the credit life insurance premium at R4.50 for all credit agreements except mortgage agreements. “The regulations will be published anytime from now,” noted the NCR.

 

 Handy tip: Knowing your credit score is important to manage your debt and know your financial standing. You can apply for a comprehensive credit report from Kudough through Justmoney.

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