DebtSafe Blog

3 Clicks to Over-Indebtedness

It is shocking and scary to know that consumers can pave their way to over-indebtedness with just three (3) clicks using modern-day technology. These days it is all to ‘normal’ to not only apply for credit but to also get it approved within a few seconds. The concerning question here is: does the credit provider conduct a thorough affordability assessment to make sure that the consumer can keep up with the agreed upon payments?

According to Matthys Potgieter, debt expert and spokesperson at DebtSafe: “Previously consumers went to creditors to ask for credit BUT NOW things have changed and instead hard selling credit comes directly from the creditor to the consumer”.

Potgieter explains that: “these days consumers get confronted with pre-approved loan applications via various mobile apps or other methods like SMS, email and telephone calls for example. Before consumers click ‘accept’ on such an application, I would like to ask them the following question: ‘if you withdraw or use all this money on the same day, would you be able to afford the loan’s instalments in future?’ and if they answer ‘no!’ – then they, with the click of the ‘accept’ button, will already be over-indebted.”

The latest statistics (March 2018) released by the National Credit Regulator (NCR) indicate that South Africa has 25,46 million credit-active consumers.  A shocking 9,7 million consumers (38%) have impaired credit records. That almost totals one (1) in every 25 credit-active consumers that sit with an impaired credit record and might be over-indebted.  Crucial thoughts here, are: “how far and in what why do reckless lending practices (by credit providers) contribute to the impaired credit records AND over-indebtedness of many South Africans?”

To give an indication – DebtSafe has just released the first of its kind Reckless Lending Indicator (for the period of April to July 2018).  The analysed data of the top ten (10) credit providers based on agreements that appear to be reckless, suggests that the ‘big’ credit providers (listed below in an extract from the report) are playing a major role in the reckless lending environment in South Africa:

Reckless Lending is evident with just three clicks of a button, and it is time to urgently do something about it. Debt counsellors, credit providers and consumers have to take hands and end this all-too-easy destructive battle that has a big impact on the South African macroeconomy.