South Africans with credit and loans will soon be paying less
Government has published its final “credit life insurance” regulations which will provide more protection for consumers who are currently paying out loans and other credit agreements.
Credit life insurance is a life insurance policy designed to pay off a borrower’s debt if that borrower dies.
According to the National Credit Act (NCA), credit life insurance includes cover payable in the event of a consumer’s death, disability, terminal illness, unemployment, or other insurable risk that is likely to impair the consumer’s ability to earn an income or meet the obligations under a credit agreement.
Prior to the introduction of these new regulations, the amounts charged by insurers weren’t capped. This was especially problematic as credit life insurance is typically mandatory when taking a loan out in South Africa, leading to unscrupulous creditors severely overcharging.
According to the new regulations, the cost of credit insurance will now be limited to R2 per R1,000 of the deferred amount for mortgage agreements. In addition, a monthly credit insurance limit of R4.50 for each R1,000 owed has been set for all credit agreements, except mortgages.
“The regulations will provide more protection for consumers by ensuring that the insurance cover is appropriate for the needs of consumers. Consumers who are not employed cannot be sold retrenchment cover,” said Senior Legal Advisor at the NCR, Nthupang Magolego.
The regulations also prescribe the minimum benefits that must be offered to consumers and the limitations or exclusions that apply to the insurance cover.
“A consumer who dies or becomes permanently disabled will have his or her outstanding debt under a credit agreement settled by the credit life insurance policy. If the consumer loses his or her job, the policy will pay instalments due under a credit agreement for up to 12 months,” said Magolego.
The new regulations will officially come into effect within the next six months.
Read: You may be in for a nasty surprise if you try make changes to your home loan facility
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