Johannesburg - Large commercial banks are throttling the economy while the housing market threatens to collapse and millions of consumers are in debt, debt counsellors Consumer Assist said on Tuesday.
"Reserve Bank Governor Tito Mboweni is among those starting to accuse banks of starting to throttle the economy as they hold on to credit and aggressively pursue the indebted," Consumer Assist said.
The property market was starting to collapse as banks were not issuing loans, it said.
"Estate agents say sales are down at least 30%.
"In the United States, President Barack Obama has warned banks against tight-fisted loan policies saying it will impede economic recovery."
According to South African debt counsellors, most creditors were still aggressive - especially with vehicles and mortgages.
"Most banks just a year ago were offering easy credit, now they're seizing the homes and cars they gave credit for."
Consumer Assist said new statistics showed 46% of people could not pay their full rental each month.
Consumer Assist CEO Andre Snyman pointed out many indebted consumers thought it was better to sell their houses or cars.
"They don't realise they still have to pay back any amount owing and not over a long period, but immediately," he said.
"It is better for such individuals to immediately go under debt counselling so the terms of the loan can be restructured and they don't lose the house or car," he said.
However, he stressed, it was critical for heavily indebted consumers to go for help before legal action was taken against them - "once legal action has begun we are constrained in how much we can assist".
He said 66 759 people were being helped by debt counsellors in South Africa and the figure was growing at 7 000 a month.
"We estimate that this year those under debt counselling will grow by at least 300%," Snyman said.
"Debt counselling is working even though many creditors try to resist it," he said.
According to Snyman, some banks were still trying to seize the homes of those under debt counselling.
"I've personally flown to Durban and Cape Town to assist families where banks have tried this.
"Once an individual is under debt counselling, no one can touch his or her assets for the first 60 days while the debts are being renegotiated," Snyman explained.
"After that, creditors cannot remove assets as long as the person keeps paying back, according to the restructured loan or credit agreement," he said.
He warned that despite a worsening financial scenario and aggressive pursuit of loans, stores were still giving easy credit which exceeded consumer's salaries, coercing them into potential debt traps.
"Because the National Credit Act is new, there is still some confusion from consumers on how to use debt counselling and there are also areas where government and business need to develop systems to better help to those trying to get out of debt," Snyman said.
- Sapa