Consumers advised to become credit wise

The enacted stricter affordability assessments now require that lenders request three months bank statements (or similar credible income and expense verification) before approving a credit application.

In addition, lenders are required to calculate discretionary income, as well as all existing debts and maintenance obligations before making a decision as to whether individual consumers qualify and can afford loans.

“Consumers need to understand that credit provided responsibly needs to be repaid,” said GetBucks’ Reynolds.

“If this does not happen, paying customers will continue to subsidise non-paying customers with credit becoming increasingly unaffordable.”

“In terms of the stricter affordability assessments, this means consumers need to be honest and upfront when declaring current debt and earnings,” Reynolds commented.

With these new regulations now in place, Reynolds said lenders across South Africa are already scrambling to ensure compliancy with immediate effect, which is something she warned consumers to be aware of. “With more stringent checks in place, experts predict a vacuum in the lending environment,” she added.

Reynolds believes that in addition to regulating the sector, another key focus should be on educating consumers to adopt responsible habits when it comes to the use of credit.

“Consumer education remains a critical component to ensuring disadvantaged and financially vulnerable consumers are empowered to make financially responsible borrowing decisions,” she said.

“It is essential that government and industry work together to ensure consumers understand the importance of managing their credit commitments and borrowing within their limits,” she added.

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