Consumer credit
Take control of your financial situation today – if you are struggling to pay off bills then it’s time to do something proactive.
According to recent statistics there are around 24 million active credit consumers in South Africa. Around 9.8 million of those are either in arrears or battling to make payments. Paul Slot, director at Octogen, a financial services company, says that around 53% of these consumers believe that more debt is their only solution, 42% of consumers will do nothing and wait for the credit providers to take action against them. Only 5% of consumers will take action themselves to rectify the situation.
Slot says that in the majority of cases, around 65%, the consumer is able to do something about his or her situation. It’s up to you to take the initiative and make changes.
When you can’t pay
If you don’t pay an account and it falls in arrears, the credit provider will send you a section 129 notice. This is the first step in a legal process. You must take it seriously.
What is a Section 129 notice?
The notice is issued in terms of section 129 of the National Creditors Act. The credit provider must inform the consumer that he or she is arrears on the account. A notice may be issued 20 days after the account falls into arrears. If you need to apply for debt review, you must do so within 10 days of receiving the letter.
If you ignore the letter You forfeit your rights to apply for debt review and invite the credit provider to take legal action against you. Don’t assume that because you haven’t picked up a registered letter from the post office, that the process won’t continue. If you do nothing, the credit provider will take action. If a judgement is obtained, it remains in place for 30 years – the credit provider can collect payment on the debt anytime during this period.
- The credit provider will update the credit bureaus and any further applications for credit on your behalf will be denied as you are listed as a bad payer.
- If you have a bank overdraft, it may be called in.
- Assets like a home or car may be repossessed.
- The credit provider may also appoint a debt collection agent who will harass you to make a payment. This can lead to additional stress.
- Non-payment and a legal process through the courts may result in a garnishee order – the money will be deducted from your salary to repay the debt. The court decides how much you should pay. Collection costs are added to the total debt.
Your best option If you receive a section 129 notice, contact your creditor provider and pay the full arrears amount. If the arrears have been paid in full this cancels the consequences of the section 129 notice.
In some cases the credit provider may be willing to accept a lower monthly repayment in order to help you meet your debt obligation. This arrangement does not undo the effect of the section 129 notice. This means the credit provider can still take legal action despite the payment arrangement.
If you can’t pay then apply for debt review within 10 days of receiving the letter.
Caution: Don’t take out further debt to cover existing debt. Paul Slot says it’s a bad credit practice and only postpones the problem to a later date. Also avoid payday loans – they have very high interest rates (60%) and additional fees.
Take charge of your finances
Will you be one of the 5% of consumers who take action themselves to resolve financial difficulties and free up more cash in order to pay off debt?
You can take action yourself. Here is some handy advice:
- Review your spending patterns. List all your payments. Look at luxuries and make cuts on these. For example, take lunch to work instead of buying takeaways every day, cancel your satellite TV subscription, revisit education costs or extramurals, find ways to reduce food costs, and possibly downgrade your current vehicle.
- Don’t cancel your retirement savings, short-term insurance or medical aid, instead downgrade or shop around for a better deal. Risk cover is important.
- By improving your cash flow, you can start to pay off your accounts. Start with the smallest account first. Once the account is paid off, close it.
- Repeat the process with the next account.
You can ask for assistance
- If you feel that you are unable to complete the budgeting and cost reduction process yourself then contact a financial wellbeing consultant for assistance or use the free Octogen budget planner at www.budget-planner.co.za to assist you. The information which you record is kept private and confidential.
- Study the report or ask a consultant to explain it to you. Commit to and implement the proposed plan.
- Pay off the smallest debt first, then close that account. Repeat the same process with the next account.
Resources
- Paul Slot, director at Octogen, www.octogen.co.za