Fin24

Consumers lie to get loans

2012-10-24 16:37

Johannesburg - Consumers are not honest about their expenses and will therefore obtain loans they cannot afford to pay off, a credit expert said on Wednesday.

"A lot of consumers do not write down their expenses and there is no scientific method of getting this. Sometimes people thumbsuck," said National Debt Mediation Association CEO Magauta Mphahlele.

"Sometimes, because they want the loan, they will under-declare their expenses just to secure the loan from the credit provider."

When a consumer did this, the loan concerned could not be declared reckless, because the consumer was dishonest.

Mphahlele was speaking on the sidelines of a credit and over-indebtedness summit in Midrand.

She praised the National Credit Act (NCA) for bringing control to the amount of interest that credit providers could charge consumers.

The NCA had made credit providers responsible for conducting affordability assessments before granting credit.

"Research has shown that credit providers are doing the assessment. If you look at the data, there is about [a] 45% rejection of credit applications," she said.

"That 45% then go and borrow money from loan sharks, friends and families."

She said another loophole in the NCA was that the National Credit Regulator recorded only credit agreements, leaving out other kinds of debt such as child maintenance, some cellphone contracts and municipal debt.

Recent data showed that South Africans had debt totalling R1.3 trillion.

No cushion

"What we are seeing is the lack of financial management. People do not save. If there is an emergency at home they have to go and borrow," said Mphahlele.

"People do not have a cushion. Say, if Eskom increases electricity by 16%, where are people going to get that extra money?"

Mphahlele warned that the level of over-indebtedness was pushing the country's debt-to-income ratio to 77%, which was a bad sign.

Moreover, consumers were not utilising the debt review process created under the new credit regulation environment.

According to the NCR, nine million people had defaulted in their debt payment.

However, since 2007, only 300 000 people had applied for debt review, Mphahlele said.

"People become over-indebted not because of borrowing, but sometimes its lack of financial management. They don't budget, they don't monitor their expenditure. They don't understand the cost of credit."

Comments
  • faizieishlah.shabalala - 2012-10-24 16:59

    National hobby. Lie when you need to. And go to church on sunday !!!!!!!!!!!!!!!!!!!!!

      tim.gordon.5011516 - 2012-10-24 17:13

      And I suppose the bankers tell the truth???

  • ianon.ym - 2012-10-24 16:59

    Eish - those figures make for sad reading and point out the economic reality in SA, and if you think it is going to get better, think again - I can see another petrol price increase in November :(

      Onke Mdingi - 2012-10-24 18:04

      Consumers get no bail-out from government as is the case on big business.

  • muruti.malungana - 2012-10-24 17:07

    This is absolute truth. Ppl outshine others by getting into serious car debt, credit cards, overdraft

  • stanley.marries - 2012-10-24 17:43

    This crap is easy to say when you earn more than 300k per annum!!!

  • mongwadi - 2012-10-24 18:37

    Perhaps if we were not being over taxed, we can be honest. Just saying

  • lebo.ntsibolane - 2012-10-24 18:51

    At least they are not stealing like most high authorities.gues if they sort:\r\n1 food,2 tax,3 electricity,4 salaries,5 public transport,6 schools, no one w4ll borsow.

  • lacrimose.wolf - 2012-10-24 20:12

    So I thought FICA was supposed to take care of that? When I have applied for any credit, I have to produce my last 3 months' bank statements where all is revealed and sign for permission to examine my credit record. So how are people still able to lie their way into debt? Seems to me the requisite checks are not being carried out.

      J.Stephen.Whiteley - 2012-10-25 07:40

      I'm sure that's true.

  • lebo.ntsibolane - 2012-10-24 22:12

    I read people say that and what.simple english, the government is the one in debt not the people.i know that and SO YOU.i am simple life.i'm not rich through stealing or off debt.

  • nyiko.ngobeni.5011 - 2012-10-25 08:03

    Liars. The credit act says lenders must conduct credit checks and in the process check who else the debtor is owing and what the payments are. These details are on the Itc system and if a debtor lies they can see it. Eg if I don't declare that I have a bond, the loan co can pick it up because all credit agreements are supposed to be on the Itc system, and they're almost there without fail.

  • debtfree.digi - 2012-10-25 11:20

    "When a consumer did this, the loan concerned could not be declared reckless, because the consumer was dishonest." This statement in the article is in fact incorrect. Even if a consumer provides incorrect information (by mistake or on purpose) Credit providers have access to information via 1) credit bureaus and 2) consumers bank statements which show their expenses. If a consumer says: i only spend R500 on food but the statement shows R1500 to pick n pay then the obligation/ fault shifts back to the credit provider and the credit could be declared reckless. www.debtfreedigi.co.za - SA's Debt Counselling Industry Magazine

  • nieklaassen - 2012-10-26 07:43

    NDMA, commends does not make sense how could the CEO make a reckless statement,and I quote, "A lot of consumers do not write down their expenses and there is no scientific method of getting this. Sometimes people thumbsuck," said National Debt Mediation Association CEO Magauta Mphahlele. "Sometimes, because they want the loan, they will under-declare their expenses just to secure the loan from the credit provider." When a consumer did this, the loan concerned could not be declared reckless, because the consumer was dishonest." UNQOTE. Such cheap talk must stop, it is clear that certain credit providers will never make peace with fact, that the very system which is use by now them ( credit providers) now, this is the very system which was use in the old days. NDMA, must inform the regulator and the public as a whole, what does the National Loan Registrar stand for? And why do we get the feeling that NDMA is favouring credit providers? Arthur Nieklaassen

  • Gerhard - 2012-11-01 14:56

    "there is no scientific method of getting this" ; That is one of the most uninformed statements I've seen in a long time. This is not a case of think before you speak, please - THINK.

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