MORE South Africans than ever before are mired in debt. Despite the government’s best efforts through legislation like the National Credit Act, consumers are being ensnared by hard-pitching salespeople and bludgeoned by debt collectors and unscrupulous lawyers.
As our Consumer Watch editor, Wendy Knowler, reported yesterday, the interest rate cut earlier this year hasn’t even made a dent in the broader problem. Indeed, almost half of our credit-active population are not in good standing as of June this year. They are missing payments or have had a judgment against them – or have even been handed over to debt collectors.
To make matters worse, this picture reflects only people borrowing money on formal credit agreements, not those in trouble with their municipal, clothing, medical or cellphone accounts. It also doesn’t show the scale or scope of the problem affecting people who have gone outside formal lending institutions to loan sharks charging exorbitant interest rates.
As awful as this broad picture is, the true horror lies in the fine print: consumers who have become ensnared in extended warranties which are not worth the money they are sold for, or garnishee orders which are being used by unscrupulous legal practitioners to milk a bad situation and keep consumers paying long after the capital has been repaid.
There is an argument that many South Africans are the authors of their own misfortune, by blindly living beyond their means.
The corollary is that many people are forced to borrow just to survive, not to buy luxury goods.
Just as the problem is not straightforward, nor can the solution be simple. Instead, what is needed is a range of interventions, beginning with an education campaign around credit and the hidden pitfalls.
The second has to be a muscular approach to holding unscrupulous money lenders, debt collectors and legal practitioners to account.
Repaying debt is one thing; usury is a beast of a different colour altogether.