Cape Town - South Africans are the biggest borrowers in the world, according to a recent World Bank survey, and 10.26 million people have accounts that are three months in arrears, the National Credit Regulator (NCR) says.
Credit Ombudsman Nicky Lala Mohan said the World Bank survey showed that South Africans had more debt than any other nation. According to the World Bank, 86 percent of South Africans have debt, followed by the Iranians, where 71 percent borrow money.
South Africans are battling to pay their debt, according to a NCR report, which shows that 22.28 million accounts have been in arrears for three months or more.
A recent amendment to the National Credit Act (NCA) has come into force to prevent overindebtedness. Mohan said South Africans’ debts were mostly home and car loans and credit cards, and many people who could no longer get credit turned to loan sharks.
But since the amendment had been implemented, there were affordability guidelines.
Mohan said there was now a criteria used to conduct an affordability assessment and consumers who were regular customers of credit might find that the new application of a “minimum living expense” affected their access to credit.
Some consumers fill in any amount for living expenses in order to qualify for new credit. With the amendment, the credit provider will automatically have to take a minimum amount into account.
Mohan said in the past the NCA did not provide adequate protection. “Consumers who were already struggling were granted new credit all the time.” The
consequences included people falling into arrears where collection processes and legal action followed.
“One of the reasons for the high default rate was the fact that reckless credit agreements were part of normal business practices for many credit providers.”
Mohan said some people had also lied about their expenditure when they applied for loans and this had led to increased overindebtedness. “Some people would declare their monthly expenses as being as little as R22.”