Almost half of credit active consumers in South Africa are struggling to pay their creditors.

That is one in every two people walking around with a credit card in their pockets! Arguments around whether the actual number of credit active consumers are growing at a slower or faster rate seem academic at this point, because digging deeper into the statistics released by the NCR for the September quarter does not make it any easier to accept. The industry has extended credit to almost 81000 people who didn’t have credit before putting the total number of credit active consumers just short of 20.3 million. Compare that to the 71000 new consumers who have been added to the list of people who can’t pay their accounts timeously and one starts to see the extent of the real problem. For every 8 people who enter the credit market, another 7 new consumers seem to have defaulted. That, in anyone’s language translates to risk for credit providers. With cost of unsecured credit to the consumer (in the form of initiation fees and interest rates) already at its maximum in many instances, something else has to compensate.
Could the Debt Counselling industry also be the answer to some of the industry problems? First National Bank Debt Review department went on a country wide roadshow during November and invited many of the Debt Counsellor’s to attend. According to their figures, they seem to be collecting on bad debt at a cheaper cost through Debt Counselling than by legal action. They also mention that consumers are more likely to get out of debt through a debt counselling process than if only the one account is handed over for collection to debt collectors. In the Debt Counselling process, a debt counsellor restructures all of a consumer’s account so that the consumer will only have one payment each month. Eugene Cilliers, manager of Pay Plan Solutions mentions that this makes for better budgeting by the consumer and treats all credit providers fairly. He also mentioned that in some instances the credit providers are making huge concessions in interest rates and fees in order to assist consumers who are struggling thereby creating a huge benefit for the consumer too.
NCR CEO Nomsa Motshegare said the regulator was “getting worried” about rising impairments on credit records, and echoed the sentiment that credit providers and consumers need to exercise caution.
Eugene from Pay Plan Solutions advises that consumers speak up early when they find they are struggling. Clear signs of debt stress are when one takes out credit to pay for other debt, or starts missing payments, and when this starts happening, consumers need to approach a debt counsellor for advice.

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