IN a climate where financial confidence is on the rise, the essential nature of credit—be it personal loans, credit cards, or the increasingly popular “buy now, pay later” schemes—remains undisputed.
Yet, this surge in demand is not without its pitfalls, as many consumers find themselves ensnared in a web of financial hardship, credit lead ombud at the National Financial Ombud Scheme (NFO), Howard Gabriels warned.
As South Africa steps into the New Year, countless citizens are wrestling with the dual demons of financial distress and uncertainty regarding their rights. The complexities of credit agreements, coupled with a rise in over-indebtedness, make navigating this landscape a daunting task.
Fortunately for those facing credit-related challenges, the NFO is armed and ready to assist consumers, ensuring fairness, transparency, and justice in these matters. Offering free alternative dispute resolution, the NFO stands as a safeguard for credit-active individuals, empowering them to reclaim control over their financial futures.
“With the Government of National Unity (GNU) bringing hope and optimism; the easing of inflation; and an interest rate cut, consumers are gaining greater financial stability. Thus many consumers access credit for individual and family economic stability,” Gabriels states, highlighting the delicate balance between credit accessibility and financial prudence.
According to TransUnion, which tracks financial trends across the nation, South Africa’s credit market boasts an outstanding balance of R2.37 trillion as of the second quarter of 2024—a staggering figure that underscores the immense reliance on credit.
The credit division of the NFO has jurisdiction over non-bank credit disputes, which include various credit avenues such as store and furniture accounts, microloans, non-bank credit cards, and vehicle finance.
“Credit consumers can rest assured their complaints are in capable hands with our dedicated and qualified adjudication team that has the expertise to resolve non-bank credit disputes such as reckless lending and issues relating to over-indebtedness and inaccurate credit reporting,” Gabriels said.
However, a significant gap in consumer awareness remains stark: many South Africans overlook the necessity of routinely reviewing their credit reports. “An estimated 87% of South Africans who take credit have errors on their credit reports, which can adversely affect a consumer’s creditworthiness,” Gabriels revealed.
The threat of identity theft looms larger than ever, with the Southern African Fraud Prevention Services reporting a jaw-dropping 356% increase in incidents from April 2022 to April 2023, followed by a staggering 400% surge in 2024.
“Identity theft surged by 337% in 2023, often manifesting on credit reports. The microfinance sector, clothing retail sector, and banking customers are frequently targeted,” Gabriels warned, stressing the urgency for consumers to remain vigilant.
Regularly checking credit reports can not only unearth inaccuracies and thwart potential fraud but also empower individuals to enhance their credit standing. Errors on these reports can significantly obstruct the financial opportunities available to credit-active consumers.
“Your credit report is not just a summary of your financial activities. It is a tool that empowers you to protect your financial future,” Gabriels said.
All South Africans are entitled to one free credit report per year from each registered credit bureau. The NFO is poised to ensure that errors on credit reports are rigorously investigated and rectified.
“Creditors who lend irresponsibly and recklessly to consumers who cannot afford repayments will also be held accountable. Credit providers have a duty to assess your affordability before granting credit. In some instances, we can recommend for the debt to be written off. Each complaint is assessed and resolved on its own merits,” Gabriels said.
As January comes to an end—a time traditionally dedicated to reflection and resolution—Gabriels urged all South Africans to use this opportunity to review their credit reports and arm themselves with knowledge of their rights.
“We encourage all South Africans to reach out to us if they believe they have been treated unfairly in the credit space,” he said, echoing a clarion call for consumer empowerment in a landscape fraught with challenges.