Financially “stretched” consumers cautioned against using unregistered credit providers

With the start of the year being financially demanding, the Gauteng Department of Economic Development has encouraged consumers, who will be borrowing money from credit providers, to be wise and ensure that credit providers do not violate their rights.

This as some consumers could be facing financial challenges to the extent that they might need to apply for credit to meet their financial obligations such as school fees, school uniforms, transport and rent, among others.

Consumers have been cautioned against using unregistered credit providers such as ‘Abomashonisa’ that overcharge interest, and take consumers’ identity documents and their Social African Security Agency (SASSA) cards to enforce payment.

“This is unfair business practice. Sometimes, when consumers’ credit applications decline, consumers resort to borrowing from Abomashonisa.  However, this does not help the consumer because of the exorbitant interest rates that are charged by these unregistered credit providers.

“If your application is declined by all registered credit providers, it means that you have a bigger financial problem than you realise. Rather seek assistance by negotiating for lower instalments with your current credit providers, paying off and closing some accounts than accessing more credit through unregistered credit providers,” Gauteng Department of Economic Development Director for Education, Awareness and Stakeholder Relations Milly Viljoen said.

According to the Consumer Protection Act (CPA), consumers have a right to receive information in plain and understandable language.

“Consumers should read and understand the terms and conditions, and further ask questions if they seek clarity. This will allow them to understand Credit Life Insurance, which can be a lifesaver when they are unable to repay the debt due to loss of income, unemployment, disability, etc,” Viljoen said.

Consumers are urged to  consider the following tips:

• Borrow only when it is necessary.  Avoid using credit for consumables such as groceries.
• Verify the authenticity of credit providers, even the ones that are advertising on social media, by contacting the National Credit Regulator first before applying for credit. Unregistered credit providers will make you more financially constrained by overcharging interest.
• Understand the additional cost that comes with credit. The cost of credit includes interest rates, once-off initiation fees, monthly service fees, credit life insurance, etc. Consumers should read and understand the pre-agreement statement and quotation which will include all the costs involved.
• Do not sign immediately when applying for credit. The pre-agreement or quotation has five (5) days cooling period. Sign ONLY when you understand the terms and conditions.
• Do not sign a blank credit agreement/document.  Read, understand, and ask relevant questions if you seek clarity. Sign ONLY when satisfied with the terms and conditions.
• Check your credit report often- You are entitled to a free credit report once a year. You have the right to dispute any information that is wrongfully written on your credit profile.
• Do not agree to pay an ‘upfront fee’ when applying for credit. Fake credit providers may force you to pay a fee before granting you credit.

The Gauteng Office of Consumer Affairs works with different stakeholders in consumer protection to ensure that consumer rights are protected.

Thus, consumers should contact the National Credit Regulator on 0860 627 627 or e-mail complaints@ncr.org.za to report unregistered credit providers or any credit provider that violates their consumer rights in the credit industry.