Correctional Services said that “matters are under control” at Johannesburg’s Sun City Prison on Wed.
Heavily indebted consumers have started gearing up to have their unpaid debt cancelled when the National Credit Act becomes law on June 1.
Fred Steffers managing director of the Consumer Profile Bureau said that his company had been swamped by calls from consumers who wanted their debts cancelled because they believed they were unfairly over-indebted and therefore eligible to have those debts cancelled.
"There is absolutely no question that large numbers of consumers are going to make use of this avenue to get out of debt at the expense of credit grantors - mostly retailers and microfinance outlets - which sold them goods or services or loaned them money in good faith," Steffers said, adding that while some consumers would take advantage of the act, there were other genuine cases where credit grantors should have realised that customers were becoming over-indebted.
"The legislation governing this issue has been badly put together with loopholes that you could drive a tractor through. It requires no higher education or technical expertise from a debt councillor, which means that pretty much anybody who wants to be a debt councillor can register with the National Credit Regulator," said Steffers.
One organisation that will be offering debt counselling is the South African Socio Economic Empowerment Federation (Saseef). Saseef president Nobby Cerone disputed the fact that consumers would benefit unfairly from the act.
"Over a long period of time credit grantors have been providing credit to consumers without ensuring that they were able to repay the loans," noted Cerone.
One unexpected outcome of the Credit Act after June 1 may be the fact that consumers will find it much more difficult to source credit because of the likelihood of debt being cancelled by a debt councillor, Steffers said.
"Because of the considerably higher risk involved for credit grantors, consumers may be refused credit altogether or granted much less credit than they ordinarily would have been entitled to. While nobody can say for sure just exactly how much of an impact debt cancellation is going to have on the industry, there is no doubt that it is going to have some impact," Steffers said. - Sapa