Could be more difficult to get unsecured loans

Johannesburg - It is hugely important for indebted consumers to make sure when they applied for loans that they could in fact afford to pay them back, according to Neil Roets, CEO of Debt Rescue.

Because of the fact that credit bureaus now carried much less information about indebted consumers thanks to the new department of trade and industry regulations, it was incumbent upon consumers to do their own credit assessment to see whether they could afford additional debt.

Roets said the new regulations could lead to over indebtedness, because credit grantors were unable to accurately assess the ability of consumers to repay their loans.

"To some extent I think we are beginning to see greater caution on the side of consumers to take on new debt. The fact that the retail industry as a whole showed flat earnings this year compared to the same period last year as well as the fact that two of the largest furniture retailers are both going through rough times is evidence of this.

"With African Bank under curatorship and desperately trying to get rid of furniture retailer Ellerine, which is now under business rescue, and Lewis Stores reporting 'extremely challenging' trading conditions, it would seem that consumers have become more cautious about spending and taking on new debt," said Roets said.

"Unsecured loans are also going to become more difficult to come by, because South Africa's largest credit provider in this sector, African Bank, now under curatorship, will almost certainly become more cautious about extending credit to consumers who cannot prove that they are credit worthy."

He has come across an urban myth among deeply indebted consumers that they will not have to repay their outstanding loans to African Bank, because they believe the bank has gone out of business.

"Obviously this is not the case and if anything, whoever takes over the loan book of the bank, will probably be more aggressive in trying to collect outstanding debts before they expire," said Roets.

He said the overall situation for consumers remained "dire" which was evidenced by the fact that there was a huge increase in the number of people who had reached the end of their tether and had to seek protection from their creditors by going under debt review.

"We have recently had to substantial increase our staff compliment to cope with the increased demand for our services. By going under debt review deeply indebted consumers are able to repay their debts over an extended period without having their homes or other belongings attached by credit providers," said Roets.