In 2006 Stanley’s wife lost her job and his salary was not enough to pay all their debts. Stanley decided to put himself under administration to protect his assets.
Today we have the National Credit Act, and Stanley would have followed a similar route by applying for debt counselling, which prevents creditors from attaching assets like his house as long as he comes to an agreement to repay the loan based on his new affordability.
“I started to manage some of my debts and I saved 10% of my salary. I also rented out a room and put that money aside to renovate the house,” said Stanley, who followed a very disciplined lifestyle, sticking to his budget and repaying the negotiated lower monthly instalments on all his debt.
Each year he used some of his savings to renovate the house and in 2008 he was able to sell it for significantly more than the amount he paid for it.
He used this money to settle his administration order.
“I received the information on how much was still outstanding, I wrote to the administrator and paid the amount into the trust account”.
Stanley had a problem with the administrator who still wanted more money. This attempt to add extra costs or interest is one of the unsavoury practices of administrators or debt collectors.
As this particular administrator was a lawyer Stanley took the matter to the Law Society, and the administration order was rescinded, which meant it was cancelled.
For the next two years Stanley saved his money and had enough cash to put a deposit on a new home.
His wife had also found a new job.
He thought it would be a simple matter to apply for a home loan, yet his bank would not assist him as they said he still had a judgment against his name.
Stanley wrote to City Press and his details were forwarded to FNB Housing Finance. This division deals with customers earning R15 000 or less and offers home loans of up to R500 000.
FNB Housing Finance looked into Stanley’s credit record.
“He showed us the evidence that he had resolved his judgment; it had just not been cleared by the credit bureau.
“This is a major complaint we often receive, but if we are provided with the correct paperwork it is relatively easy to sort out,” said Marius Marais, chief executive for Housing Finance.
From FNB’s perspective, Stanley was a stable person who had held the same job for a long time and he worked hard to settle his debts.
He had saved up a 10% deposit which improved his affordability.
Marais said that that when it came to granting loans, the bank looked at both the willingness and ability to pay the loan.
The credit history showed the willingness to pay and the budget was the affordability.
Although Stanley had a judgment five years ago it was for a relatively small amount. He settled it and his banking behaviour had since been good.
“We focus more on current behaviour and frequency to see if this is a serial offender. We recognise that people sometimes run into trouble,” said Marais.
In fact, Marais said, Stanley was considered a low-risk customer despite his judgment. He could well afford the loan, he had a deposit and he had demonstrated that he was the sort of person to honour his debts.
Stanley was provided with a home loan below the average lending rate for the division.
By using the protection of administration (debt counselling), which prevented the creditor from attaching his house, and by paying off his debts quickly Stanley put his debt problems behind him.
» Although Stanley settled his administration order early, he did not ask for a discount. According to Paul Slot, head of the Debt Counselling Association of South Africa, creditors want to have the debt settled as quickly as possible so you may be able to negotiate to pay a lower amount if you are settling the debt early.
» It is very important to know your rights and what to do when creditors will not remove your negative listings or when lawyers try and extract extra fees.
The credit ombud is a good place to start. Contact the office on 0861 66 2837 or email@example.com.
The website is www.creditombud.org.za
Complaints about debt counsellors need to be referred to the National Credit Regulator 0860 627 627 or firstname.lastname@example.org.
The website is www.ncr.org.za.
» Don’t take no as a final answer. Under the National Credit Act banks are obliged to provide a detailed reason as to why the loan is declined. This allows the customer to rectify the problem.
In Stanley’s case he discovered that his credit record had not been cleared.
Unfortunately home-loan procedures are like a sausage machine, with banks processing loans to the value of R2 billion a month so they don’t bother to investigate further.
In fact, FNB’s main home loan division had turned down Stanley’s application based on the incorrect credit information. It was only because it was referred to FNB Housing Finance, which has a more specialised team, that the error was discovered.
Find out why your application was turned down and see if there is further information that you can provide that would change the bank’s rating.