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Consumers under debt counselling paid creditors R10 billion last year

While consumers contended with a difficult economic environment, creditors were being repaid between R700 million to R800m on a monthly basis, according to National Debt Counsellors’ Association chairperson Benay Sager. Picture: Pexels

While consumers contended with a difficult economic environment, creditors were being repaid between R700 million to R800m on a monthly basis, according to National Debt Counsellors’ Association chairperson Benay Sager. Picture: Pexels

Published Sep 30, 2021

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WHILE consumers contended with a difficult economic environment, creditors were being repaid between R700 million to R800m on a monthly basis, according to National Debt Counsellors’ Association chairperson Benay Sager.

The association said that last year consumers under debt counselling paid creditors an amount of R10 billion.

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Sager said the South African debt counselling industry has proved to be “extremely impactful”, because it was able to negotiate lower interest rates. Most consumers who successfully completed the process saved between R50 000 and R80 000 in interest and fees. Each quarter around 10 000 consumers were said to complete debt counselling and get clearance certificates, which was a considerable improvement since the early days of the industry.

Since 2016, more than 150 000 clearance certificates have been issued.

“You realise the significance of this when you consider that, on average, each of these consumers is repaying over R200 000 in debt,” said Sager.

Despite such milestones, like other sectors, debt counselling has not escaped the negative impact of the Covid-19 pandemic, although many consumers continued to repay debt and saved hundreds of thousands of rands in interest.

Providing a status overview of the sector at the recent Debt Review Awards, Sager said that between April and June last year, new debt counselling applications had declined.

Debt counsellors would normally help between 120 000 to 140 000 new applications a year, but last year the figure was in the region of 100 000. There had been a modest increase since June.

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Of the people already in debt counselling, at least 10 percent, or between 20 000 and 25 000, had asked for payment holidays.

He said the regulator had been extremely supportive over the past 18 months, running awareness campaigns to inform and educate consumers, which had resulted in an increase in enquiries.

The association said the timing was proving positive as historically low interest rates had shielded many consumers. As these were expected to begin to rise again, possibly early next year, debt counsellors would need to be ready to assist more consumers, particularly those with assets, as increasing repayment rates would negatively impact them.

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Sager said the industry was well regulated and got the results, although the outdated remuneration model for payment distribution agencies needed to be reviewed.

He also believes that while the courts were closed during lockdown there was an opportunity to digitise, which could have streamlined the process and eliminated the “reams of paper” that debt counsellors need to take to court.

Meanwhile, Investec economist Annabel Bishop said the SA Reserve Bank’s Quarterly bulletin update on consumer ratios showed that households were less indebted than before, at 66.7 percent of disposable income in the second quarter this year, and 67.1 percent in the first quarter, versus a reading of 75.3 percent in the first quarter before the revisions.

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“Disposable income was revised up to R3.6bn from R3.1bn for the fourth quarter last year and reached R3.8bn by the second quarter this year, while household debt remained unchanged at around R2.4bn in the fourth quarter last year, rising to R2.5bn in the second quarter this year,” said Bishop.

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