Heedless spenders in a fix

Johannesburg - Consumers have flooded debt counsellors' offices nationwide after over-extending themselves during the holidays, debt counsellor Consumer Assist said on Monday.

"They are now panicking as they face school and university fees and creditors begin calling," Consumer Assist said in a statement.

Consumer Assist Cape Town manager Leila Beltramo said they received many enquiries in the first week of January.

"There is a range of problems - in some instances, people expected bonuses that did not materialise or were far smaller than in previous years, or they did not anticipate the big slice the taxman would take of the bonus," she said.

Tjaart Kruger, financial director of Consumer Assist, said it was worrying that a full year after the global economic crisis began, people had still not learnt that they needed to budget and that they had to cut spending and be more sensible with their income.

"We are concerned that some are taking economists' predictions that the economy is starting to recover as an excuse to start overspending.

"We need to remind consumers that economists failed to predict the global economic crisis and they may be too hasty in predicting a recovery now."

He said there were "disturbing" economic signals coming from the US and South Africa.

"Last week the National Credit Regulator also warned the economy was still depressed and an average of 9 000 consumers a month were applying for debt counselling; they advised consumers not to get into further debt and to be wary of taking out loans to pay off debt."

System abuse a bad idea

André Snyman, CEO of Consumer Assist, said debt counsellors were also concerned that some consumers tried to abuse the National Credit Act. The act stipulates that those under debt review have a 60-day period in which creditors could not take legal action against them, while a debt counsellor attempts to restructure their repayments.

"We have situations where people do this and after the 60 days renege on payments, or say they don't wish to be under debt review any longer.

"This not only threatens their credit record - it is almost certain to see creditors come after them with the full weight of the law."

This increased their risk of losing homes and cars, and created a situation where some creditors mistrusted debt review. It also jeopardised the chances of honest consumers who had fallen on hard times.

Snyman said debt grew in 2009 and that trend was likely to continue through 2010.

He said even if the economy began to recover, job creation would lag substantially behind because companies were going to be nervous of downturns and would wait before taking on new staff.

"Consumer debt will continue to rise over the short to medium term and not begin settling until at least 18 months after a real economic recovery takes place.

"This means that in the best-case scenario South African consumers need to watch their rands and cents well into 2011 and relief will probably not come before the end of that year."

He predicted two more difficult years for consumers and urged companies to do more to institute financial wellness courses in their organisations.

- Sapa