SOUTH African consumers face a staggering debt crisis as statistics released by VeriCred Credit Bureau (VCCB) put the current debt at a whopping R2.077 trillion by the end of the second quarter this year.
The data represented all the debt that was still outstanding at the end of the second quarter this year after some partial repayments had been made. These statistics also indicated that at that period, 717 495 people were under debt review.
National Debt Advisers (NDA) chief executive Sebastien Alexanderson said that it was time South Africans started seeking relief options for their mounting debt.
“Though debt review has received its share of negativity, more consumers are becoming aware of its benefits, as evidenced by an increase in the number of consumers seeking debt counselling,” he said.
A benefit of debt counselling and the process of debt review is having a registered debt counsellor negotiate with creditors on behalf of consumers for reduced payments, as well as putting forth restructured payment plans which are referred to court for final determination. The consumer is protected from legal action by credit providers on debt where legal action has not already commenced.
Recently, National Debt Counsellors’ Association chairperson Benay Sager said that while consumers contended with a difficult economic environment, creditors were being repaid between R700 million to R800 million on a monthly basis. The association said that last year consumers under debt counselling paid creditors an amount of R10 billion.
“We have seen many consumers buckle down and make the required sacrifices and lifestyle changes to get themselves on track again. They are aware that while under debt review they will not have access to new credit, as the goal is to first clean their slate of existing debt and then re-evaluate their financial situation and appetite for new debt,” he said.
“Their access to credit will only change once they have settled their short-term debt, and their payments on their mortgage agreements are up to date. When all of these conditions are satisfied, debt counsellors issue them with a clearance certificate and notify all creditors and credit bureaus of their new credit status. Consumers should ensure they understand the terms and conditions of their debt counselling agreement, and be aware of costs involved,” he said.
Alexanderson said many people entered the debt review programme seeking immediate relief from debt collectors and creditors, only to exit the programme before their debt was repaid.
“Many people talk the talk of getting out of debt but are not willing to walk the walk all the way to the end. This is short-sighted, as it opens the consumer up to legal action from creditors and possibly even the repossession of assets via the courts.”
National Debt Counsellors’ Association said that each quarter, around 10 000 consumers completed debt counselling and received clearance certificates. Since 2016, over 150 000 clearance certificates had been issued. Each of these consumers was repaying over R200 000 in debt.
BUSINESS REPORT ONLINE