Consumer bad debt rising

By Drum Digital
05 October 2012

The number of consumers handed over to debt collectors has risen while those in good standing have dropped, the National Debt Mediation Association (NDMA) said on Friday.

"High levels of unemployment, combined with increased levels of real inflation, have led to more consumers not being able to service their debt," NDMA CEO Magauta Mphahlele said in a statement.

National Credit Regulator (NCR) figures for the June quarter showed an increase in the number of consumers with impaired records -- by 170,000 to 9.22 million -- from 9.05 million in the previous quarter.

The number of consumers regarded as being in good standing fell by 60,000 to 10.38 million.

"This means that nearly half of the 19.6 million credit-active consumers at the end of June were not in good standing," Mphahlele said.

According to the NCR, 14.4 percent of consumers were one to two months in arrears; 19.9 percent were three or more months in arrears; while 13.3 percent had an adverse listing against them; and 14.2 percent had judgments or administrative orders against them.

Only 38.6 percent of consumers were currently up to date with their repayments.

"Over-indebted consumers need to talk to their credit providers as soon as they realise they may not be able to make their repayments. The sooner the better."

With nearly one in five consumers more than three months in arrears, they were likely to be handed over for legal action.

"By not acting quickly enough and allowing debts to be handed over for legal enforcement, it can cost thousands of rands, which the consumer cannot afford."

An alternative to debt counselling was to approach the NDMA, which would help consumers develop an income and expenditure document and a proposed repayment plan.

"As soon as you experience or anticipate payment difficulties, inform your credit provider," Mphahlele said.

"Consumers may not be aware of their rights and responsibilities, but talking to your credit provider is often the fastest, most affordable way to find a workable solution to your debt problems."

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