Rising debt: calls for greater consumer vigilance

WITH the dramatic shifting of credit from a tool for upward mobility to a survival mechanism for necessities like food, rent, electricity and transport, alarm bells are being sounded about unsustainable debt levels of consumers.

- STAFF REPORTER

The National Financial Ombud Scheme South Africa (NFO) is concerned about high levels of debt exposure in the wake of the release of TransUnion’ 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.

With many households relying on credit just to meet basic needs, the NFO has warned 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.

Financial strain

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%.

The statistics for other retail credit products are equally concerning for the NFO.

Default rates now stand at 27.1% for retail instalment accounts, 25.9% for clothing accounts, and 14.9% for retail revolving credit. The TransUnion report shows that while more consumers are taking up loans, retail instalment credit is up 16%, clothing credit 7.6%, and revolving credit 5.4%.