The new fees and interest limitations rates have implications on consumers who have credit such as home loans, vehicle finance and any other loans,” said Wikus Olivier, Debt Management Expert at DebtSafe.
The new regulations will come into affect in May 2016 and will set a standard of maximum calculated amounts which credit providers will not be allowed to exceed or abuse.
Olivier says although most of the limitation fees and rates are decreasing, it might lead to reputable credit providers not approving loans as easily as in the past since it might not be profitable.
He adds that this situation could also boost the “loan shark” industry, which is not the way out because of the extremely high interest rates.
It is important that consumers make sure, and are aware of the interest rates they are paying on their existing debt. The interest rates shouldn’t exceed the maximum allowed limits.
“The same goes for admin fees. In terms of the new Credit Amendment Act Regulations, credit providers must disclose all fees, interest and charges before any credit is given.
“As consumers we need to do our research to understand the maximum fees that are allowed and check that charges levied are legitimate before we accept the credit,” Olivier continues.
Admin and service fees are usually overlooked when applying for credit. It can form quite a significant part of the instalment. Lower fees will mean paying debt off faster.
Olivier advises that consumers should be vigilant during credit applications and make sure they understand all aspects surrounding the credit quotation and what forms part of the monthly instalment. Credit Linked Insurance (CLI) usually forms a very significant part of the instalment.
Some credit providers charge very high CLI premiums. It is within a consumer’s right to decline the insurance offered by the credit providers and apply his/her own policy to the debt. Wikus provides a list of the changes to the Regulations.