Did you know that about 2,8million South Africans in formal employment are spending more than they earn?
Clark Gardiner of the Careways Group and his team discovered that lawyers, debt collectors and lenders are abusing consumers with predatory lending practices and down-right theft.
But from Friday the National Credit Act will provide you with legally enforceable recourse, said Gardiner.
The experience endured by the likes of Kwena Manamela, who had to pay R12 000 for a loan of R2 000, ends this week.
Gardiner said moneylenders make consumers sign an acknowledgement of debt before the loan is granted and this sets up a consumer for default.
This allowed moneylenders to later apply for a default judgment and unfairly attach a person's salary.
Gardiner said that in most cases the debt is inflated and is applied retrospectively. The moneylenders do not apply it from the date of default but from the date of application.
Manamela had taken a loan of R2000 from Onecor in November 2004. He authorised them to debit his account with R676 over 12 months.
That meant he would have to repay R8112, which he accepted because he desperately needed the cash. But he did not receive the loan amount, he said.
"They did not debit my account and three months later they obtained a court judgment against me," said Manamela.
He said R376 was deducted from his pay slip every month from April last year to last month.
The garnishee order was presented to Manamela's employer. "I have never paid back the loan amount and now I have to pay back R7800, which includes lawyers' and administration costs.
"What makes me sad is that I have paid R12000 so far and they don't want to refund my money," said Manamela.
Consumers who share Manamela's experience should approach Gardiner for help.
Gardiner said his company has found that one consumer who took a loan of R28 000 was made to pay back R162000.
Though that specific bank could not justify how the repayment amount ballooned, it would only reduce it to about R50000.
The research also revealed that a furniture shop opened an instalment agreement with a consumer then later cancelled it and replaced it with a loan agreement.
That allowed the furniture shop to charge the consumer 34percent interest instead of 20percent.
The effects of the act on consumers:
l Finance and administration charges are prescribed;
l No charges other than those prescribed by the act can be levied under any circumstances;
l If the lender exceeds the prescribed charges, the loan may be declared void and the lender might have to refund all payments made to him and all his rights in the transaction might be extinguished;
l Consumers must be given a statement by the lender that shows how much he will repay over the term of the loan;
l A credit provider may implement legal proceedings against a borrower only after he has notified the borrower in writing that he is in arrears. The borrower is entitled to be re-instated to the contract by paying the arrears. The consumer can be charged only R17 for the letter and no further charges may be levied;
l If the borrower ignores the notice, or does not pay the arrears, the credit provider may start legal proceedings 20 days after the default occurred;
l The act compels the service provider to give reasons for declining a credit application;
l The act gives consumers the right to receive credit documents in their preferred language;
l Consumers can obtain a free replacement copy of any document pertaining to the loan within the first year of the contract;
l When a consumer is counselled, it means his debt is re-arranged and reduced to affordable monthly installments. No interest is chargeable until the debt is paid off;
l No extra cost would be charged;
Their debts will have a predetermined repayment plan so that they know exactly when the debt will be repaid;
l They will be listed by the credit bureau as being under debt review. Once the debt is paid in full, this information will be removed;
l Consumers must approach the debt counsellors to benefit from the terms of this act.