Thousands need help with spiralling debts

CONSUMER debt is spiralling with 150000 consumers expected to be under debt review by Christmas, the national credit regulator said yesterday.

The NCR said that the 100000 consumers presently under debt counselling, owed R20billion of which R12billion was mortgages.

Liberty Life consumer economist Tendani Mantshimuli said: "These figures are not surprising given that the economy is very weak at the moment."

Even if the economy began a slow recovery, for at least 18 months there would be a rising number of consumers applying for debt relief.

"There is a lag between the economy lifting and the personal circumstances of individuals improving," André Snyman, chief executive of debt counselling company Consumer Assist said.

Snyman said people were only now coming forward for debt counselling.

"They have been using their reserves for example, their savings and investments but now they have no other choice but to get help through debt counselling."

Snyman said consumers attempting to address their over-indebtedness were experiencing delays as there was a 10000 case log-jam before magistrates' courts.

He noted that the courts were mostly refusing to make rulings until there was a declaratory order clarifying consumer and creditor rights in terms of the National Credit Act.

"That finally came from Justice BR du Plessis in the Pretoria high court on August 21 but with the courts overstretched it is unlikely they will be able to make much of a dent in the 10 000 cases already stacked up before the end of the year," Snyman said.

Economists agreed yesterday that the high number of people registering for debt counselling was as a result of the National Credit Act.

"The National Credit Act is fairly new to South Africa. What we are seeing here is the system being established," said Dawie Roodt, an economist at the Efficient Group.

The NCR's Peter Setou confirmed that 1,3million people had fallen into arrears from June 2007 to July 2009 with 93000 under debt review - affecting R12billion of mortgages or R20billion debt in all - and at a rate of 10000 new applications a month.