A collections agent for a credit provider was reprimanded after contravening the National Credit Act (NCA), the credit ombud said on Thursday.
This was after a complaint was received by a man who had taken out a R5000 loan, then realised he could not pay it back as agreed, said credit ombudsman Manie van Schalkwyk.
A garnishee order of R800 per month was attached to his salary to cover the debt accrued from October 2008 to March this year. A garnishee order is a court order for such deductions, taken directly from the one's salary.
By April this year, the man had paid back R24,000 on the R5000 loan, but was told he still owed R6760.
The credit ombud found this was not in line with the NCA, and ordered the collections agent for the micro lender to close the file and cancel the outstanding amount.
“Credit providers are entitled to include a number of charges in a credit agreement, but these must be in line with the national credit regulations,” Van Schalkwyk said.
A letter was also sent to the man's employer requesting that the garnishee be cancelled immediately. He said the public should be aware of hidden costs when signing credit agreements, and these should be explained in the documentation.
“Consumers must also be made aware that should they default on a credit agreement, they are liable for collection and attorney fees.”
This meant that interest and collection fees could cost much more than the original amount borrowed.
Van Schalkwyk advised the public to ensure they could afford the repayments before taking out a loan. He said those taking loans should regularly check the outstanding amount of their loan, and what charges they were being billed for. - Sapa