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Cape Town - Profiteering on the misery of poor people by granting them credit at high interest rates must come to an end because the effects will be devastating, warned Cosatu Western Cape secretary Tony Ehrenreich in an interview with Fin24 in studio.
Watch the interview
Workers are getting into deeper levels of debt because of poverty and rising food prices, he said.
"People are buying food and just general necessities through credit and other means," said Ehrenreich.
He said this needs to be addressed through the National Credit Act or other types of regulation.
"We have got to find a way to restrict these levels of indebtedness ... and there (have to be clearer criteria) of how people qualify for loans, how they qualify for additional credit, because it is causing a bubble that is going to burst and will have huge implications for the economy."
Ehrenreich said it is already causing a huge social problem because these pressures are translated into wage bargaining and other types of social protest action.
"We can't have a circumstance where we are essentially selling money to people, instead of products, at higher interest rates."
Many people are profiting out of this, but the long-term effects will be devastating, he added.
"Profiteering on the misery of poorer people by just extending loans to them ... must stop," said Ehrenreich.
Although there is legislation in place to restrict consumers from accessing credit they cannot afford, debt levels are still rising.
This could be a result of affordability assessments not being done at all by some credit providers, said Kem Westdyk of Summit Garnishee Solutions.
"They often just rubber stamp an affordability assessment".
Westdyk said consumers tend to lie about their income expenditure, but the onus should be on credit providers to be able to tell when they submit bogus information.
Westdyk said this is unlikely to change until reforms in the National Credit Act are implemented.
- Fin24
Workers are getting into deeper levels of debt because of poverty and rising food prices, he said.
"People are buying food and just general necessities through credit and other means," said Ehrenreich.
He said this needs to be addressed through the National Credit Act or other types of regulation.
"We have got to find a way to restrict these levels of indebtedness ... and there (have to be clearer criteria) of how people qualify for loans, how they qualify for additional credit, because it is causing a bubble that is going to burst and will have huge implications for the economy."
Ehrenreich said it is already causing a huge social problem because these pressures are translated into wage bargaining and other types of social protest action.
"We can't have a circumstance where we are essentially selling money to people, instead of products, at higher interest rates."
Many people are profiting out of this, but the long-term effects will be devastating, he added.
"Profiteering on the misery of poorer people by just extending loans to them ... must stop," said Ehrenreich.
Although there is legislation in place to restrict consumers from accessing credit they cannot afford, debt levels are still rising.
This could be a result of affordability assessments not being done at all by some credit providers, said Kem Westdyk of Summit Garnishee Solutions.
"They often just rubber stamp an affordability assessment".
Westdyk said consumers tend to lie about their income expenditure, but the onus should be on credit providers to be able to tell when they submit bogus information.
Westdyk said this is unlikely to change until reforms in the National Credit Act are implemented.
- Fin24
