National Financial Ombud warns South Africa of unsustainable debt levels among consumers

WITH credit increasingly being used to cover essential living costs such as food, rent, electricity, and transport, alarm bells are being sounded about unsustainable debt levels of consumers, according to the National Financial Ombud Scheme of South Africa.

- DIEKETSENG MALEKE

The National Financial Ombud Scheme South Africa (NFO) describes itself as a single, one-stop, all-in-one dispute resolution service made up of four former longstanding industry ombud schemes: the Ombudsman for Short-Term Insurance, the Ombudsman for Life Insurance, the Credit Ombud, and the Ombudsman for Banking Services.

The NFO says it is concerned about high levels of debt exposure in the wake of the release of TransUnion’s Q1 2025 Industry Insights Report, which confirms a troubling trend: credit products commonly used by lowerand middle-income consumers are experiencing rapid growth in both uptake and default rates. The NFO says that with many households relying on credit just to meet basic needs, it warns of a surge in retail and non-bank loan defaults and urges consumers to beware of reckless lending, which can only place them deeper in debt.

The NFO says, according to TransUnion, which explores financial trends in South Africa:

■ Non-bank personal loans now reflect the highest rate of serious delinquency in over three years, with 41.3% of account holders falling three months or more into arrears

■ This represents a sharp 520 basis point year-on-year increase and outpaces the default rate for bank personal loans by over 15%

■ Default rates now stand at 27.1% for retail instalment accounts, 25.9% for clothing accounts, and 14.9% for retail revolving credit

■ Retail instalment credit is up 16%, clothing credit 7.6%, and revolving credit 5.4%

The simultaneous rise in missed repayments signals growing financial strain on households.