10 Wilken Credit Debt
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10 Wilken Credit Debt

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10 Wilken Credit Debt Presentation Transcript

  • 1. Credit and debt: Problems In Accessing and dealing with it Ina Wilken - 2007 - - South African National Consumer Union -
  • 2. Introduction: A multi-tentacle creature?
    • Bills and Regulations
    • Managing Credit and Debt:
      • FSB
      • NCA
      • CPA
      • Debt Collector’s Council
    • Over indebtedness
    • 11 Official languages
    • 37 Government Departments
    • Illiteracy. . .
  • 3. South African Background
    • Credit market > R700 billion/year
    • Involves 14 million consumers and
    • 4 000 credit providers
    • ± 300 000 over-indebted 700 000 debt stressed
    • Overdrafts rising 32%, credit cards 188%, leases 289%,
    • installment sales 138%
    • After increasing by 25% in June 2007, private
    • sector credit extension slowed to 23,1% in July 2007 .
    • Mortgage Advances increased from R295b to R793,1b
    • between 2001 and August 2007
  • 4. Disbursements: Quarter ending February ‘07 NCR Industry Statistics 0.52% 24,894 0.7% $8,414,979 Section 21 Companies 0.41% 19,700 0.8% $10,404,721 Co-Operatives 2.49% 119,667 0.8% $10,139,383 Trusts 32.37% 1,557,136 13.7% $172,865,174 Close Corporations 38.45% 1,849,989 43.8% $552,556,405 Private Companies 0.86% 41,404 0.3% $3,371,115 Public Companies 24.90% 1,198,068 40.0% $504,920,800 Banks 100.00% 4,810,858 100.0% $1,262,672,576 Total for Industry % of Industry by number Number of loans disbursed % of Industry by value Total Disbursements
  • 5.
    • Enacted 1 st June 2007
    • Aims to protect the consumer from being
    • granted credit recklessly, and the creation of a
    • fair and non-discriminatory credit market.
    • The National Credit Regulator : responsibility for the enforcement of the Act
    • The National Consumer Tribunal : conducts hearings into related complaints
    • Applies to all credit products where payment is deferred and where interest or fee is payable: overdrafts, credit cards, installment agreements, leases, secured loans and credit guarantees.
    • Unfortunately one of the side effects is that the majority of South Africans, already struggling under resent economic climate, are unable to get credit
    • Example: decline rate for home loans up to 60% per year!
    The National Credit Act
  • 6. The National Credit Act and
    • Before any credit provider lends money, it must
    • do a thorough check to see whether the client will
    • be able to afford the loan.
    • If he isn’t, and the client fails to pay back the loan,
    • this could be regarded as “reckless credit” and written off
    i) Borrowers: ii) Lenders:
    • If you’re in the business of lending, pawning or selling
    • goods on hire-purchase-type arrangements, the NCA will
    • heavily affect your business.
    • If you run an ordinary business that allows some customers
    • to pay at the end of the month or sometime after they receive
    • the invoice, you will be mildly affected.
    • You then needn’t register at the National Credit Regulator, nor
    • do you have to do affordability checks on your customers.
  • 7. Structure for recourse in South Africa www.finmarktrust.org.za
  • 8. The Consumer Protection Bill
    • The consumer
    • The Supplier
    • Transaction
    • Service Agreement
    • Goods
    • Services
    • Key provisions
    Defining :
  • 9. SA Black L iving S tandard M easure
      • LSM1 : Rural; income < R1 000/month (poorest group)
      • LSM10 : Urban; well-educated; income up to R19 000pm
      • (richest)
      • LSM5/6 : Fastest-growing (R2 500 - R4 000pm); young women
      • LSM5/6 : 3 million; collective buying power R160-billion per year
      • Bappies : “ B ooming, A spirational and P reviously P oor” – SA’s
      • biggest economic wave yet. Mostly Black, young,
      • single, females ( 1,09 million; falling in LSM5 group)
    (Consumers: Range LSM1 – LSM10)
  • 10.
      • Buppies : “ B lack U pwardly Mobile P rofessionals”; Black elite since the 90’s
      • BAPPIES + BUPPIES = 27% of population! Spending power of R70b/year – almost 40% of entire bottom half of SA economy!
      • “ BLACK DIAMONDS” : 322 000 in 2006, increasing to 2,5m in 2007! Average income R5 000 – R12 000/m. Buying power of R180b!
      • NB! “Black Diamonds” are not really making it! A mere 300 000 can afford it! (paying mortgages, car installments, school fees, traveling, golf, eating out – incomes >R12 000)
    SA Black L iving S tandard M easure
  • 11. Income Profile: LSM1 – LSM9
  • 12. LSM Spending Profile
  • 13. LSM Banking Profile
  • 14. Educating SANCU’s “self-help approach”
  • 15. The “Water Tank” Diagram
  • 16. i) Calculate your income
  • 17. ii) Fixed Payments
  • 18. iii) Variable Payments
  • 19. iv) Discretionary Payments
  • 20. v) Your personal Budget Sheet
  • 21. Five easy steps to personal financial empowerment (i)
    • [1] Be your own business and make profit
      • Income
      • Costs
      • Profit / Loss
    • [2] Ideas on maximizing profits
      • Increase income
      • Controlling and reducing costs
    • [3] Preparing your own budget
      • What is a budget?
      • Why budget?
      • How to budget
    - The Careways Group -
  • 22. Five easy steps to personal financial empowerment (ii)
    • [4] Experiencing the power of savings
      • What to do with your profit
      • Savings
      • Making provision for major life events
    • [5] The dangers of borrowing
      • When to borrow
      • Where to borrow
      • What are your rights and obligations?
      • Already over indebted – what to do?
    - The Careways Group -
  • 23. Dealing with Debt!
    • Develop a Budget
    • Contact your Creditors
    • Dealing with Debt Collectors
    • Credit Counseling
    • Auto and Home Loans
    • Debt Consolidation
    • Bankruptcy
  • 24. Factors impinging on SA Consumers
    • World-wide inflation on foodstuffs
    • Imported inflation, especially oil price
    • Interest rate hikes: 350 basis points
    • since mid-2007
    • Price of public utilities i.e. electricity,
    • water, telephone services are
    • regulated by Government – influence
    • inflation – consumer has to accept!
  • 25. Four Credit Associations holding hands?
    • The Banking Association of South Africa,
    • Consumer Credit Association (CCA)
    • Furniture Traders Association (FTA) and
    • Micro Finance SA (MFSA)
    • Representing members who provide in excess of 95% (R850b)
    • private sector credit to consumers in SA
    • Common goal : dealing with over-indebtedness in the interest of a healthy and vibrant credit market
    • Financial advice to over-indebted consumers; facilitate
    • restructuring of their debts to improve affordability; and
    • Ensure that consumers can eventually fully recover from their over
    • indebtedness, fully repay their debts and remain viable and credit worthy borrowers.
    • “ Such an industry-driven voluntary mediation process could offer
    • consumers and credit providers a potentially better, less costly deal.”
  • 26. 2007 Banking Bill for low income groups
    • Allows access to banking services, mainstream products and financial advice
    • 2004: financial Charter
    • Mzansi Bank; >3 million accounts at present
    • 2006: 49% of total population “unbanked”
    • Problem of access to financial services too large for commercial banks alone
    • SA Micro Finance Apex Fund (Samaf): micro credit, savings, insurance and payment facilities to active poor rural households, farmers and agri-businesses. Provides loans of up to R100 000 payable over 12 months.
  • 27. Access to entrepreneurs in SA: challenges and opportunities
    • Financial literacy
    • Attitudes of banks
    • BEE code targets
    • Lack of awareness of development finance
    • Lack of financial confidence
    • Lack of appropriate products
  • 28. Self-regulation by South African Banks
    • Banking sector regulated by the Reserve Bank
    • SARB is a private, listed company
    • Measures the compliance of banks
    • banks against international set of
    • rules agreed in Basel, Switzerland
    • Independent from Government
    • SA banking sector is one of
    • the most sophisticated sectors
    • on the globe
  • 29. Conclusion
    • Government’s big effort to get
    • banking facilities to the non bankers must continue
    • Critical counterpart to that however: ILLITERACY !
    • Communicate with all bodies, NGO’s, the media and e-systems
    • All Government departments and bodies (DTI; Ombudsmen; NCR; FAIS FSB; Consumer Tribunal . . .)
    • All Educational and Research organizations
  • 30. Finally: Just d ó it!
    • Education, education, education. . .
    • Educate them to read !
    • Educate them what is credit, debt. . .
    • Educate them what’s the problem
    • Educate them how to fix it
    • Educate them what to do thereafter. . .
  • 31.