Debt trap warning
Asset managers have warned consumers to be cautious of readily available free credit as retailers and banks attempt to sign up as many customers as possible before next June when most of the provisions of the new Credit Bill come into effect.
The National Credit Act came into existence this year to ensure that consumers are protected from unfair lending practices by unscrupulous lenders operating in the credit industry.
In terms of this new regulation, the restrictions on lending practices and the regulatory red tape required to be completed before a client can be advanced further credit will slow the granting of credit.
To counter this, credit retailers and banks are signing up customers in droves, which experts caution will put consumers into a debt trap in the new year.
It is not only consumers who will experience financial difficulty as a result of the current reckless lending, but retailers and banks are also falling over themselves by signing up customers before the June deadline, warn the experts.
"Many of these new customers have no experience of shopping on credit. At some point, bad credit will come back to bite the credit granters," said Alphen Asset Management, a subsidiary of PSG Fund Management Holdings.
Experts have urged consumers to avoid applying for credit cards that they don't have to have in order to save themselves from falling into crippling debt in the new year.