Spend wisely during

A large number of South African consumers have impaired credit records

(accounts which are three months or more in arrears), which suggests that millions of consumers are still struggling with too much debt.

The Credit Ombud, Nicky Lala Mohan, says that many households rely

on credit to cover their day-to-day expenses, which suggests that they are not living within their means.

The latest stats show that of the 24.08 million credit active consumers, there are 9.67 million with impaired credit records.

With the festive season approaching, this gives rise for some concern, says Lala Mohan.

Overspending during this time of year is often an emotional response. Consumers feel that they have worked hard all year and deserve to spoil themselves and family members.

 However, many consumers are already struggling to pay their debts and others don’t budget for

the additional festive season spending, causing them to fall into the debt trap as credit cards are maxed out.

“Consumers need to be warned that it is irresponsible and dangerous

to spend too much on credit just because it seems like everybody else is doing so in the shopping malls.

“What consumers should realise is that come the end of January, you have to pay back the loans as well as school fees etc.

 If you cannot afford the repayments and fall behind, it can be very costly in terms of interest.

This is usually the first step to a debt spiral. If it’s not in your budget, don’t borrow to get it,” he cautions.

New regulations The Credit Regulations were amended recently and the effect, especially in the clothing retail space, is that con sumers may find it more difficult to open credit accounts.

The purpose of the stricter rules related to the granting of credit is to curb reckless lending and prevent consumers from obtaining credit which they can not afford.

Lala Mohan says consumers may find the process of opening new accounts during this year’s festive season more difficult than in the past, and they should be aware that certain documentation, as well as credit checks, will be required.

Another new regulation that came into effect on 11 November 2016 relates to the requirement for all providers of credit to register with the National Credit Regulator (NCR).

 This means that any credit granted by an unregistered credit provider after this date will be unlawful and unenforceable.

Consumers are advised to take care to only do business with registered entities and report illegal activities to the NCR.

Each year consumers spend thousands on items such as gifts and other luxuries because they get carried away with festive spending.

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