Loan sharks' hidden costs

19 September 2011 - 09:01
By Sowetan

SOME defiant money- lenders continue to offer people loans without disclosing hidden costs, contrary to the provisions of the National Credit Act.

Credit mbudsman, Manie van Schalkwyk, has warned consumers to be vigilant when taking out loans.

Mvula Mbhele recently lodged a complaint with the credit ombud against a certain credit provider. He was not aware there were hidden or unexplained charges levied against him after taking out a loan.

He also accused the money-lender of granting him a loan knowing it would render him over-indebted. He took out a loan of R5000, but later realised he would not be able to repay the loan as agreed. The credit provider placed a garnishee order on his salary for R800 a month to recover the debt from October 2008 to March 2011.

"The total amount I had paid by April 2011 was R24000, but I was told I still owed R6760 on the loan," Mbele said.

The Office of the Credit Ombud found the collections agent for the micro- lender had acted in contravention of the National Credit Act and was ordered to close the file and write-off the outstanding balance.

Van Schalkwyk said his office also issued a letter to the consumer's salary department, requesting the garnishee be stopped with immediate effect. He said credit providers were entitled to include a number of charges in a credit agreement, but these had to be in line with national credit regulations.

"Costs that a credit provider is allowed to include in the credit agreement over and above the principle debt or capital amount includes service fees, initiation fees, credit insurance and interest."

The credit agreement must explain all the costs to the consumer. He said monthly service fees were not allowed to be more than R50 plus VAT per month or R600 plus VAT per year. Contact the credit ombud office on 086-1662-837 or visit