More South Africans are falling behind on their debt payments

 ·5 Oct 2020

As effects of the Covid-19 pandemic continue to be felt across the world, new credit granted to consumers decreased by 56.72% quarter-on-quarter from R126.35 billion to R54.68 billion said the National Credit Regulator (NCR) on Monday.

This as the regulator released the Consumer Credit Market Report (CCMR) and the Credit Bureau Monitor (CBM), which are based on the data, submitted to the NCR by registered credit providers and credit bureaus, respectively.

The latest edition of the report covers credit market information from March 2020 to June 2020.

It also showed that the number of credit agreements entered into decreased by 47.73% quarter-on-quarter from 3.93 million to 2.05 million.

In terms of credit granted for the quarter ended June 2020:

  • The value of new mortgages granted decreased by R25.95 billion (66.65%) quarter-on-quarter and by R27.20 billion (67.69%) year-on-year;
  • Secured credit which is dominated by vehicle finance, decreased by R18.57 billion (47.51%) quarter-on-quarter, and by R20.69 billion (50.22%) year-on-year;
  • Credit facilities decreased by R9.71 billion (50.53%) quarter-on-quarter and by R11.60 billion (54.97%) year-on-year;
  • Unsecured credit decreased by R15.10 billion (59.64%) quarter-on-quarter and by R18.42 billion (64.32%) year-on-year.

The NCR noted that the total outstanding consumer credit balances (or gross debtors book) as at June 2020 was R1.96 trillion, representing a decrease of 0.94% quarter-on-quarter and an increase of 3.09% year-on-year.

The trends for outstanding balances for the quarter ended June 2020 were as follows:

  • Mortgages debtors book decreased by R4.26 billion (0.43%) for the quarter ended June 2020 and increased by R25.90 billion (2.70%) year-on-year;
  • Secured credit debtors book decreased by R4.51 billion (1.01%) for the quarter ended June 2020 and increased by R7.63 billion (1.75%) year-on-year;
  • Credit facilities debtors book decreased by R6.96 billion (2.64%) for the quarter ended June 2020 and increased by R7.42 billion (2.97%) year-on-year;
  • Unsecured credit debtors book decreased by R2.97 billion (1.33%) for the quarter ended June 2020 and increased by R15.24 billion (7.41%) year-on-year.

Credit active consumers

Meanwhile, credit bureaus held records for 26.96 million credit-active consumers, which showed a decrease of 3.69% when compared to the 27.99 million in the previous quarter.

Consumers classified in good standing decreased by 559,318 to 16.96 million consumers.

“This amounts to 62.90% of the total number of credit-active consumers, a decrease of 3.19% quarter-on-quarter and 3.65% year-on-year. The number of credit-active accounts decreased from 85.99 million to 85.23 million in the quarter ended June 2020.”

The number of impaired accounts has increased from 19.88 million (23.12%) to 20.66 million (24.24%) in June 2020, an increase of 779,707 quarter-on-quarter and 506,836 year-on-year.

The number of credit reports issued to consumers decreased from 240,688 to 217 743.

A total of 199,977 (91.84%) credit reports were issued free of charge, and the balance of 17,766 (8.16%) were issued at a cost.

There were 29,017 disputes lodged on information held on consumer credit records for the quarter ended June 2020, a decrease of 26.67% quarter-on-quarter and 21.66% year-on-year.

Struggling consumers

NCR Chief Executive Officer Nomsa Motshegare advised consumers battling to keep up with their payments to contact their credit providers first to negotiate for lower instalments or some kind of relief to assist them with their debts.

If this fails, consumers are further advised to approach registered debt counsellors for assistance.

Motshegare further advised that consumers who have credit life insurance should make a claim against their credit life insurance. Credit life insurance is an insurance that a consumer purchases when applying for credit or loan.

It covers the outstanding debt in the event of unforeseen circumstances such as death, retrenchment, unemployment, inability to earn an income, disability and others.

In the event of the consumer becoming unemployed or unable to earn an income, the credit life insurance cover provides that credit providers must settle/pay the consumer’s debt for a period of 12 months or for the remaining repayment period or until the consumer finds employment or is able to earn an income, whichever period is shorter.

Read: Here’s how much money the average person in South Africa owes on their credit card

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