Managing your money

  • Almost everybody faces money problems of one form or another. Incomes are simply not keeping up with increases in prices.
  • There are different forms of credit: loans at banks, micro loans from micro lenders, open accounts at retails stores, doctors, chemists, hire purchase or credit agreements.
  • It is OK to use credit to help you to get around temporary problems. You must not, however, carry on borrowing month after month; otherwise your problem will keep getting worse.

 

The National Credit Act

 

The National Credit Act (NCA) was passed in Parliament in 2006. This Act replaces the Usury Act and the Credit Agreements Act. The Act provides one framework for all aspects of credit, and all credit providers have to complay with the Act.

 

The Act gives consumers more protection –

  • when they borrow money;
  • buy goods, such as furniture, on credit;or
  • get finance for an asset, e.g. a house or a car.

 

It even protects consumers during cash transactions, should these accounts go into arrears.

 

A super credit watchdog – the National Credit Regulator

The whole credit industry issupervised by a body called the National Credit Regulator (“NCR”). This body has the task of educating consumers and ensuring that the credit industry complies with the NCA. Amongst other functions, it:

 

  • receives complaints, investigates breaches of the law and conducts audits on credit providers, conducts research, monitors practices and reports to the Minister on matters such as market conduct and consumer over- indebtedness
  • raises consumer awareness through education and the dissemination of information .

 

All credit providers, credit bureaux and debt counsellors are required to register with the NCR. This sentence – bold please

 

Consumer Rights and Credit

The NCA protects consumers in many ways. For example

 

  • Certain practices of agents canvassing for loans are unlawful or restricted eg door to door selling, canvassing at workplaces and homes without an invitation.

 

  • Marketing practices and advertisements are also controlled to protect consumers eg credit facility limits may not be automatically increased, and negative option marketing (if you do not decline, we will assume you agree) is unlawful.

 

  • Consumers must be given a quote, valid for five days, with all the details about the loan, so that consumers can shop around and compare prices.

 

Interest rates and other charges and fees will be controlled based on a formula which is dependent on the SA Reserve Bank Repurchase (Repo) Rate (“RR” below).

 

  • Different categories of credit will have different maximum interest rates and fee caps as follows:

 

   

CATEGORY

MAXIMUM

INTEREST

FORMULA

Example –

if the

Repo Rate is 7.5%…..

1 Mortgage agreement [(RR x 2.2) + 5%] p.a 21.5%
2 Credit cards/facilities [(RR x 2.2)+10%] p.a 26.5%
3 Unsecured

credit transactions

[(RR x 2.2)+20%] p.a 36.5%
4 Short-term credit

Transactions

(loans not more than R8000.00, and repayable in 6 months or less)

5%

per month

(60% p.a.)

 
5 Developmental credit

agreements

[(RR x 2.2)+20%] p.a 36.5%
6 Other credit agreements [(RR x 2.2)+10%] p.a 26.5%
7 Incidental

credit agreements

(eg cash transactions that go into arrears eg doctor’s bills/clothing accounts etc)

2% per month

(24%p.a.)

 

PLEASE NOTE   :  THE REPO RATE ABOVE IS AN EXAMPLE ONLY.  CONSUMERS NEED TOENQUIRE WHAT THE REPO RATE IS AT THE TIME THEY APPLY FOR CREDIT

 

 

  • In addition to the above interest rates, other charges are also allowed (although regulated) eg initiation fees, service fees, default fees and collection costs.
  • Insurance cover on loans is permitted but the charge must be reasonable and the consumer can use an existing policy as cover instead of taking a special cover for the loan. Interest must be charged monthly (unless it is a large credit agreement, over R250,000.00).
  • Contracts to be signed must be in simple language, available in at least two languages and consumers must receive a copy.
  • Consumers are entitled to a reason when credit is refused.
  • All credit providers must assess whether a consumer can afford the loan, and all loans will be recorded on a register – this aims to make sure that a consumer will not become over-indebted.

 

  • RECKLESS LENDING

Any credit provider that gives credit without considering whether a client can afford the loan or not may be guilty of reckless lending – there will be severe penalties for this and the credit provider may even lose the right to recover the debt. This paragraph in bold please

  • Most important – a consumer will not receive any protection if s/he does not fully disclose all his/her debts and expenses. In such cases the credit grantor will not be guilty of reckless lending.

 

  • DEBT COUNSELLING

When consumers cannot pay their debts, they have the right to go to a debt counsellor (this sentence must be in bold as is here) who will help the consumers to solve their problems eg restructuring/rearranging their debt repayments. Such an arrangement can be made an order of court.

 

  • Credit providers must give notice to consumers when they default advising them that they have the right to consult a debt counsellor. If there is no response to a notice after 10 days or the credit provider does not accept a proposal from the consumer or counsellor, they can then proceed to court for judgement.
  • Consumers must remember that once they have signed up for a debt counselling programme, they will not be able to apply for credit until their debt has been paid off.

REGISTRATION OF CREDIT PROVIDERS

All credit providers must be registred with the NCR. (bold please) If the credit provider is not registered with the NCR, it cannot institute a claim against a consumer for non-payment .

 

  • CREDIT BUREAUx are strictly controlled to make sure
    • That information is accurate, and
    • That information which is incorrect is immediately removed without cost to the consumer once the consumer has lodged a complaint.

The time that a default listing (bold) will remain on record will also be limited as follows:

 

 

  CATEGORIES DESCRIPTION PERIOD INFORMATION IS RETAINED ON THE BUREAU
1 Enquiries Enquiries made on a consumer’s record 2 years
2 Payment profile Factual information about the payment record/profile of a consumer 5 years
3 Adverse information Negative information about a consumer’s default on payments 1 year
4 Debt restructuring An agreement where all debts are restructured Until a clearance certificate is issued (when all payments are settled as agreed)
4 Judgements   The earlier of 5 years or when the judgement is rescinded/the creditor abandons the judgement
5 Administration orders   The earlier of 10 years or when the order is rescinded by court
6 Sequestrations   The earlier of 10 years or a rehabilitation order is granted by court

 

CONSUMER CREDIT COURT – THE CONSUMER TRIBUNAL

 

  • The regulator as well as consumers can take complaints about breaches of the NCA to a special court called the Consumer Tribunal.

 

  • Consumers have their rights protected, as well as a court to go to, if the credit provider does not comply with the law and does not address a consumer’s complaint.

 

  • Remember that there are also many other ombuds offices and organizations that consumers can go to, to have their complaints addressed. You will find the names and contact details of these organizations in this booklet in Section 8

 

Beware of negative listing with the credit bureaux

  • Always make sure that you are up to date with your credit payments or have contacted your creditior to make alternative arrangement for payment.
  • Businesses subscribe to credit bureaux, which supply them with all credit account information, whether positive or negative. When you apply for new credit your application may be refused. if your credit record is negative (it could be that you have too much existing debt).
  • You are allowed to query your credit report issued by a credit bureau.– Every consumer is entitled to receive one free copy of his/her credit record per year but no information will be given telephonically, and a copy of the consumer’s ID must be provided.
  • Consumers can contact the following credit bureaux: TransUnion :   Tel 0861 482 482 or Experian Bureau: Tel 0861 105 665
  • If you would like to know how long a listing remains on the credit bureaux, eg administration, sequestration, debt restructuring or a negative/adverse judgement listing, please refer to point 7.2.7

 Micro lending

  • Be sure that you only deal with businesses that display that they are registered with the NCR. . In the case of micro lenders compare interest rates and be sure the micro lender is registered with the NCR. Tel : 011 554 2600 ; Fax: 011 484 5122 or Email : info@ncr.org.za

Credit cards

  • Keep a list of your credit card numbers, expiry dates and the phone number of each card issuer in a secure place.
  • When selecting a card, compare the terms offered by several card issuers to find the card that best suits your needs.
  • Watch your card after giving it to a clerk. Take your card back promptly after the clerk has finished with it and make sure it is yours.
  • Never sign a blank receipt. Draw a line through any blank spaces above the total when you sign receipts.
  • Open credit card bills promptly and compare them with your receipts to check for unauthorised charges and errors.
  • Report promptly and in writing to the card issuer any questionable charges. Written enquiries should not be included with your payment. Check the statement for the correct address to send any written enquiries. The enquiry must be in writing.
  • Never give out your credit card number over the telephone unless you have initiated the call.
  • Never put your card number on a postcard or on the outside of an envelope.
  • Sign new cards as soon as they arrive. Cut up expired cards and dispose of them promptly. Cut up and return unwanted cards to the issuer.
  • Leave infrequently used cards in a secure place.
  • If any of your credit cards are missing or stolen, report the loss as soon as possible to your card issuer. For your own protection, follow up your phone calls with a letter to each issuer. The letter should contain your card number, the date the card went missing, and the date you called in the loss.
  • Arrange credit card misuse and loss insurance with the issuer of the credit card.

TAKE CONTROL OF YOUR MONEY AFFAIRS! Centre please

How do you take control?

Well, firstly, you need to look at PERSONAL BUDGETING. After that, you may need to look at WAYS OF SAVING COSTS. If you still do not have enough money to meet all your obligations, you may then need to look for OTHER SOURCES OF INCOME.

 

Personal budgeting

Many people are too scared to sit down and prepare their own budget, because they are frightened about what it will tell them, just as some people are frightened of medical check-ups. Budgeting sounds complicated, like something that only businesses or very rich people do.It’s simple and very, very important for each and every one of us. Without a proper budget, you don’t really know what is happening with your money, and your problems will probably get worse. If you don’t budget properly you will also not be able to save money.

Follow the five simple steps set out below to prepare your very own budget:

STEP 1 – YOUR INCOME

  • Work out your total net income (“Net income” means the amount of money that you take home after all deductions from your gross income have been made). by adding togetheryour salary, that of your husband or wife, and any other income, perhaps from a part-time job or sideline business. Perhaps a friend or relative stays with you and gives you some money towards household expenses. If your children are staying in your home and have part-time jobs you must also include that under income. Only this net amount will be available for you to spend each month.

STEP 2 – FIXED PAYMENTS

  • Each month, there are certain payments that you have to make, otherwise serious problems may arise. For example, if you don’t pay your rent, you could be forced to leave your house; if you don’t pay the instalment on your furniture, it could be repossessed; or if you don’t pay back money borrowed you could get a judgement against your name.
  • You should always try to keep these fixed commitments to a minimum. If you have

money problems, you should not take on any more of these types of commitments until things improve.

  • Under “loans”, include the amount, plus interest that you currently owe a micro lender, term loan lender or bank from whom you have borrowed.
  • Don’t forget to take into account payments that you do not make each month – like licences on your car or TV, school books, birthday parties and clothes and so on. You should consider setting aside money each month, in a separate savings account, so that you are in a position to meet these expenses as they arise.

STEP 3 – VARIABLE PAYMENTS

  • There are certain payments that you have to make, but over which you have some control as to how high or low these payments are – unlike those nasty fixed payments! You have to eat and drink but you don’t have to eat expensive meat and drink expensive wine every day. You may need to make telephone calls, but you can take steps to control the number of calls that are made each month. You may also need water and electricity but you can control the usage.
  • You may not know accurately enough what you spend on these types of things. If that is the case, you should keep a detailed daily record for a month or two until you know exactly what it is that you are spending your hard earned money on!

STEP 4 – DISCRETIONARY EXPENDITURE (Non-essential/luxury payments)

  • Discretionary expenditures are those that you like to make but don’t have to. Usually, it is in this area that there are the best opportunities for getting out of problems or for saving some money. Many smokers, for example, would be amazed if they sat down and calculated just how much money they spend on their smoking habit. We all like to dress nicely, but what is the point of having nice clothes and shoes if we haven’t got a home to live in!

THE GOLDEN RULE

SPEAK HONESTLY TO YOUR CREDITORS BEFORE A PROBLEM ARISES. THEY WILL LISTEN TO YOU!

A lot of people have negative listings on the credit bureau because they have not followed the personal budget steps set out above. If you plan correctly and pay your creditors on time you will build up a good credit record again. Be sure to follow the budgeting principles set out in this book carefully and your financial situation will definitely improve!