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Johannesburg - A study of the average consumer under debt review shows that the ability to afford rehabilitation dropped sharply over the months leading to April 2010.
In a statement on Thursday, debt counselling company Debtbusters said debt counsellors had to perform an annual review of their clients' budgets.
"We have seen an enormous decline in our client's ability to increase their rehabilitation amounts to their creditors," said Luke Hirst, MD of Debtbusters.
Some 86% of clients were able to increase their rehabilitation amount by at least four percent per annum in September 2009. To date, the figure has dropped to just below 60% - more than a 20% decrease, showing that the situation was not improving, Hirst said.
He said the downward trend came as no surprise in the current economic climate.
According to the National Credit Regulator (NCR), the number of applications for debt counselling at the end of March 2010 was 161 749.
"This is an astonishing increase of 18 151 applications for debt counselling in just two months."
With electricity prices soaring by 24.8% this year, times were tough for consumers, Hirst said.
"While most clients under review are more than willing to pay a higher rehab amount to their creditors each month in order to get out of debt quicker, it is evident that for some this proves impossible."
Hirst said the loss was felt by both the consumer and the banks.
"The consumer continues with the struggle to become debt free and the banks who do not receive the funds owed to them," he said.
- Sapa
