Courts lash cash-strapped consumers

However, Statistics SA figures released on Wednesday, 21 October 2009, show that the value of civil judgments for debts in the courts has leapt 32.4% in the year to August.

This should sound a loud warning bell for policymakers, who believed the NCA would expand, not diminish the ability of all South Africans to get credit.

Altogether, 17.6 million people have credit at either banks or retailers, but the concern is that 44% of them now have "impaired records" at credit bureaus, thanks to judgments or late payments.

"There is an ongoing increase in consumers with impaired [credit] records, [rising] from 36% in June 2007 to 44% in June 2009," said Peter Setou, senior manager education and strategy at the National Credit Regulator.

"The ability of people to pay existing debt is diminishing," said Mel da Silva, financial director of Octogen, which helps people restructure their debt.

NCR figures show that there is in excess of 112000 consumers who have applied for debt counselling, an average of 9000 applications made every month.

But the problem is that only 6000 of these 112000 applications have been ruled on by the courts.

The banks fear that if a customer is placed under "debt review", then they will not be able to repossess the assets quite as easily.

However, magistrates could play a role in fixing this problem when banks apply to them for civil debt judgments.

Said Da Silva: "The number of judgments should also come down because courts have the authority to interrupt the legal process and send the consumer for debt review. But, it's easier to just rubber stamp [the docket] and move on."

Source: Business Times

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