Growth in unsecured lending is unsustainable

2012-08-22 00:00

THE latest Consumer Credit Index (CCI) released by credit information giant TransUnion has illustrated the dangers of using credit to fund short-term consumption.

The CCI slumped into negative territory for the first time in more than three years in the third quarter of 2012, coming in at 48,6 points from 51,2 points in the previous quarter.

TransUnion Credit Bureau CEO Geoff Miller told The Witness yesterday that the South African consumer’s credit health deteriorated slightly over the past few months.

Miller said the latest index was influenced by two factors.

Firstly, the number of consumer loan accounts that have lapsed (more than 90 days in arrears) grew by five percent year on year. In addition, TransUnion has noticed a rise in credit card utilisation, which has grown by eight percent year on year.

Miller warned that the growth in unsecured lending, which has been the subject of many reports in the public domain, is unsustainable.

“While banks do expect high rates of delinquency on these loans and price this into their expectations, consumers continue to be bombarded with offers.”

He expects retail sales growth to moderate in the months ahead, before being boosted by a festive season-induced spending spree.

Miller urged consumers to access their credit reports from a credit bureau.

“It is important that they check their reports to make sure that the information is correct. It is also important as identity theft is very prevalent.”

Consumers are entitled to one free credit report per year.

Useful credit bureau contact numbers include Experian: 086 110 5665; Transunion: 086 148 2482 and Compuscan: 086 151 4131.

Consumers can also contact the Credit Ombud office at 0861 66 28 37 or visit

• Continually assess your income versus expenditure;

• Create and maintain financial ‘breathing space’ or head-room;

• Be measured in how frequently you enter into credit agreements;

• Make an effort to establish what is the true cost of credit, and not merely whether you think you can afford the repayments;

• Use appropriate credit offering.

THE GOOD — Using credit can be a positive thing if used by consumers to fund larger, long-term assets like property and vehicles;

THE BAD — It is problematic when consumers use credit to fund short-term material goods;

THE UGLY — Worsening loan repayment behaviour and more use of revolving credit by households.

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