How rogue debt counsellors give the industry a bad name

IF YOU'RE feeling like you’re drowning in debt, you're not alone.

- NICOLA MAWSON

More and more South Africans are turning to personal loans to make ends meet, but this extra borrowing is leaving households vulnerable - and opening the door to scammers who promise help but deliver even more financial stress.

Eighty20’s latest Credit Stress Report, for the second quarter of this year, shows that South Africans are borrowing more and falling further behind. Loan activity grew by 3% in the quarter, outstanding balances rose 1.4%, and overdue balances jumped 3.2%. Statistics South Africa’s figures paint a similar picture. Between April and June, more than 93 000 summons were issued for unpaid debt, with 26 500 judgments handed down.

DebtBusters’ second-quarter Debt Index adds that 95% of people who applied for debt counselling during the quarter had a personal loan - often taken out to cover basics like groceries, transport or school fees.

The combination of rising living costs, heavy borrowing and mounting stress creates a fertile ground for exploitation. Debt review, a process under the National Credit Act, was designed to give struggling consumers a structured way to manage their debt and repay creditors in an affordable way. Done properly, it can be life changing.

Data from the National Debt Counselling Association shows that since 2007 more than two million people have gone through debt counselling, paying back over R120 billion to lenders and giving themselves a fresh financial start.

But the same system can be misused by unscrupulous operators, trapping consumers in debt review without their informed consent and cutting them off from further credit when they least expect it.