The current strain on the local economy has resulted in many South Africans struggling to keep their heads above water. As South African lender Wonga’s research has noted, the impact of reduced household income – in addition to many lenders tightening their risk requirements before granting credit – has forced many South Africans to borrow from unregulated informal lenders, or ‘mashonisas’.
According to Brett van Aswegen, CEO of Wonga, these unregulated lenders do not subscribe to any of the conditions set out in the National Credit Act which ensures the safety of the customer. It means that borrowers are at the mercy of the unregulated lender and the terms they set and have no legal protection against excessively high interest rates or unfavourable loan terms.
The National Credit Act [35 of 2005] (NCA) is part of comprehensive legislation designed to protect the consumer in the credit market and to make credit and banking services more accessible to South Africans.
“The NCA aims to transform the South African credit market and all consumer credit providers are required to comply with it,” van Aswegen explains.
The NCA is administered by the National Credit Regulator (NCR). The act contains directives for credit providers on interest rates, fees and other charges which credit providers can charge, depending on the type of credit agreement. In addition, the act requires credit providers to supply simple contracts that are easy to understand, in two official languages, that the consumer needs to agree to before the credit agreement can be concluded.
According to van Aswegen, the NCA protects various consumer rights. These rights include being able to apply for credit; to be protected against discrimination in the granting of credit, and to be informed why credit has not been granted.
In addition, consumers have the right to have their personal and financial information treated as confidential; and to understand all fees, costs, interest rates, the total instalment and any related cost of credit.
“All responsible lending institutions should take responsibility for the financial health and well-being of their customers, particularly those that are under-banked or isolated from access to credit” he says. “Being transparent in the approach to credit provision is the first step towards ensuring a stable and sustainable credit market in South Africa.”
Should borrowers or consumers feel that these rights are not being met, they are urged to try to resolve a complaint with the credit provider causing the complaint before referring it somewhere else.
If a consumer is still not happy, they may lodge a complaint with the credit ombud by emailing ombud@creditombud.co.za or by calling 0861 662 837. Alternatively, consumers can contact the NCR at complaints@ncr.org.za or call 0860 627 627.
“Our advice to customers is to check that the chosen lending institution is registered with the NCR before considering applying for a loan”, concludes van Aswegen.
