Seek help if you’re credit-distressed, banks urge customers
DURBAN - SOUTH African banks are urging their financially distressed customers to ask for help sooner rather than later, in the form of payment arrangements or restructures as opposed to taking on further debt to repay their debt.
Derek Venter, the Absa Retail and Business Bank chief risk officer for Everyday Banking, said the economic outlook remained uncertain and the profound health and financial impact of the Covid-19 pandemic was severe and would be prolonged.
“This pandemic brought into sharp focus the need to look at customer relief holistically and across the board,” said Venter.
Absa said its customers who had credit insurance on a credit product should familiarise themselves with its terms and conditions. When in financial distress, that avenue should be pursued first.
“As a general rule, it is always advisable to repay expensive unsecured debt first, and to cut down on luxury items in order to service the debt, which may make it difficult to obtain credit later on” said Venter.
The group said a set of criteria existed to assess lending to a customer, such as income, debt commitments and monthly household expenses and, ultimately, their ability to take on additional debt.
Absa said it had the ability to craft personalised credit solutions, based on each customer’s needs, using all-encompassing forbearance offerings, short and long-term payment plans, comprehensive debt review processes and distressed property refinance options, among others. The interventions were ongoing.
Absa said it had proactively contacted all debt counsellors, notifying them that customers impacted by Covid-19 might be eligible for relief and that, where consumers have indeed been impacted, they would be provided relief through debt review. This process was later adopted by the National Credit Regulator as the appropriate form of relief for impacted consumers under debt review.
Neil Thompson, the African Bank head of product and customer value proposition, Covid-19 and its subsequent economic impact had been felt by many of their customers.
“Over the past years, we have made further adjustments to our credit underwriting models, meaning that we are prepared to take even less risk when granting credit. We adjust our credit models as and when we need to, to remain conservative and prudent in our credit granting,” said Thompson.
It had noticed that things seemed to be normalising this year, as African Bank’ applications were seeing improved levels, which meant the economy might be improving slightly.
“We will, however, still remain prudent with our credit granting. We encourage all customers who are experiencing financial strain during this period, to contact us to discuss payment arrangements that meet their needs. Changes to payment arrangements are considered on a case-by-case basis.”
African Bank said that in the case of loan customers being retrenched, receiving short time or being placed on compulsory unpaid leave, African Bank could cover their monthly payments for up to 12 months, through its credit life insurance policies. Submitting the appropriate information and required documentation was essential to access the benefits.
Theesan Reddy, the Nedbank head of strategic credit change, said the imposed lockdowns of last year meant that many people were not receiving their full or any salary for several months, which had led to above-average requests for financial assistance, compared to other periods.
“We encourage any affected customer to contact us, to discuss a tailored solution for their individual situation. There are/were several options available depending on client circumstances. Additionally, most banks offered some form of financial assistance with the aim of reducing monthly obligations for a period of time,” said Reddy.
The unemployment insurance fund said it had paid 1 787 268 beneficiaries more than R10 billion between March, 26 last year and January 19 this year. Nearly 600 000 of those had initially claimed the Temporary Employment Relief Scheme.
Of the 2.2 million who lost their jobs in the second quarter of last year, 1.4 million were not re-employed about a month ago.