Do not be complacent if you owe creditors only a small amount of money because that small debt can balloon.
Small default amounts can grow into big debts, huge legal fees and a big headache if ignored.
They start ballooning once a credit provider hands over an account to attorneys or debt collectors.
Credit ombudsman Manie van Schalkwyk says consumers often do not pay accounts they deem to be small amounts, thinking they will not be pursued for collection.
"This is a completely incorrect perception," he say. "Not paying small amounts hoping they will go unnoticed can cost the consumer much more."
He says his office recently dealt with a case in which a consumer ignored to pay back R336.20.
The matter was handed over for collection and he had to pay R900.20, with an outstanding balance of R350.
He says once a credit provider hands over an account the collectors are entitled to add a variety of costs and fees. These include fees for taking instruction, tracer fees, drafting of legal documents fees (summons and consent to judgement documentation), sheriff's fees (if they obtain judgment or an emoluments attachment order from court) and charges for phone calls, SMSes and letters sent.
On top of these fees interest also accumulates on the outstanding debt. All these costs add up, Van Schalkwyk says.
Penelope Hawkins, credit expert at Feasibility, an economic policy and research company, says debt is stressful.
"Debt stress is hard to acknowledge to oneself as well as to family and distressed consumers sometimes think that if they ignore a problem for long enough it will just go away. Instead, the problem escalates and even in cases of repossession of assets the consumer might still be left owing money," Hawkins says.
According to the National Credit Regulator's latest statistics, the number of impaired accounts has increased to nearly 17 million, compared to the previous quarter.
Van Schalkwyk says in addition to suffering unnecessary financial losses, by having to pay more than they owed, credit records are also negatively affected.
He advises consumers to act wisely when they are unable to pay their debts, no matter how small the amount.
"Once you see that you will not be able to honour your payments, immediately contact the credit provider and make alternative arrangements. This might just save you from being handed over for collections because once this process is in progress, it will cost you much more," he says.
l The Credit Ombudsman's office resolves complaints from consumers and businesses that are negatively impacted by credit bureau information or when a consumer has a dispute with a credit provider, debt counsellor or payment distribution agent.
To lodge a dispute with regards to accounts, debt counsellors or any credit bureau matters, contact them on 0861-66-2837 or www.creditombud.org.za
Small debt can balloon quickly
Do not be complacent if you owe creditors only a small amount of money because that small debt can balloon.
Small default amounts can grow into big debts, huge legal fees and a big headache if ignored.
They start ballooning once a credit provider hands over an account to attorneys or debt collectors.
Credit ombudsman Manie van Schalkwyk says consumers often do not pay accounts they deem to be small amounts, thinking they will not be pursued for collection.
"This is a completely incorrect perception," he say. "Not paying small amounts hoping they will go unnoticed can cost the consumer much more."
He says his office recently dealt with a case in which a consumer ignored to pay back R336.20.
The matter was handed over for collection and he had to pay R900.20, with an outstanding balance of R350.
He says once a credit provider hands over an account the collectors are entitled to add a variety of costs and fees. These include fees for taking instruction, tracer fees, drafting of legal documents fees (summons and consent to judgement documentation), sheriff's fees (if they obtain judgment or an emoluments attachment order from court) and charges for phone calls, SMSes and letters sent.
On top of these fees interest also accumulates on the outstanding debt. All these costs add up, Van Schalkwyk says.
Penelope Hawkins, credit expert at Feasibility, an economic policy and research company, says debt is stressful.
"Debt stress is hard to acknowledge to oneself as well as to family and distressed consumers sometimes think that if they ignore a problem for long enough it will just go away. Instead, the problem escalates and even in cases of repossession of assets the consumer might still be left owing money," Hawkins says.
According to the National Credit Regulator's latest statistics, the number of impaired accounts has increased to nearly 17 million, compared to the previous quarter.
Van Schalkwyk says in addition to suffering unnecessary financial losses, by having to pay more than they owed, credit records are also negatively affected.
He advises consumers to act wisely when they are unable to pay their debts, no matter how small the amount.
"Once you see that you will not be able to honour your payments, immediately contact the credit provider and make alternative arrangements. This might just save you from being handed over for collections because once this process is in progress, it will cost you much more," he says.
l The Credit Ombudsman's office resolves complaints from consumers and businesses that are negatively impacted by credit bureau information or when a consumer has a dispute with a credit provider, debt counsellor or payment distribution agent.
To lodge a dispute with regards to accounts, debt counsellors or any credit bureau matters, contact them on 0861-66-2837 or www.creditombud.org.za