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Media Info
 Debtors flock for counselling after festive overspend
14 January 2010
PANICKY over-indebted consumers have been flocking to debt counsellors around Port Elizabeth since the first week of January desperate for help after drowning in Christmas season shopping spree debts.
Several debt-restructuring companies, including Debt Restructuring Service and Debt Correct, reported an unusual rise in the number of people approaching them for help in managing their debts as they braced themselves for another round of expenditure on school items.
Debt Restructuring Service chief executive John Botha said the firm had experienced an increase of more than 20% in people desperately seeking help after overspending in December.
"There's been a tremendous flow of people to the offices of debt counsellors since we opened on January 4, compared with the same period last year," Botha said.
Between 12 and 20 people a day were queuing for instant assistance after plunging themselves into credit card debt and now facing the prospect of losing their entire salaries, to be left with nothing for February and March.
Debt Correct director Anton Barkhuizen confirmed a hike in the numbers of people who had not received their December bonuses or had been given little to spend in December.
"Our offices are filled daily by these people who want their debts restructured. We see more people coming in than in previous years," Barkhuizen said.
Both Botha and Barkhuizen predicted that things would get even worse later this year.
Consumers had flooded debt counsellors' offices countrywide after over-extending themselves during the holidays, said debt counsellors Consumer Assist.
"They are now panicking as they face school and university fees and creditors begin calling," the group said.
Consumer Assist Cape Town manager Leila Beltramo said many inquiries had been received in the first week of this month.
"There is a range of problems. In some instances, people expected bonuses that did not materialise or were far smaller than in previous years, or they did not anticipate the big slice the taxman would take of the bonus," she said.
Consumer Assist financial director Tjaart Kruger said it was worrying that a full year after the global economic crisis began, people had still not learned that they needed to budget and to cut spending and be more sensible with their incomes.
"We are concerned that some are taking economists' predictions that the economy is starting to recover as an excuse to start overspending. We need to remind consumers that economists failed to predict the global economic crisis and they may be too hasty in predicting a recovery now."
He said there were disturbing economic signals coming from the US and South Africa.
"Last week the National Credit Regulator also warned the economy was still depressed and an average of 9000 consumers a month were applying for debt counselling.
"It advised consumers not to get into further debt and to be wary of taking out loans to pay off debt."
Consumer Assist chief executive Andre Snyman said debt counsellors were also concerned that some consumers tried to abuse the National Credit Act. This stipulates that those under debt review had 60 days in which creditors could not take legal action against them while a debt counsellor attempted to restructure their debt repayments.
"We have situations where people do this and after the 60 days renege on payments or say they don't wish to be under debt review any longer. This not only threatens their credit record, it is almost certain to see creditors come after them with the full weight of the law."
This increased their risk of losing homes and cars and created a situation where some creditors mistrusted debt review. It also jeopardised the chances of honest consumers who had fallen on hard times.
Snyman said debt had grown last year. That trend was likely to continue this year.
"Most factories report quiet order books and although the 2010 Soccer World Cup is giving hope to many industries, South Africa has to be careful it does not price itself out of the market and get a tourist backlash which could in turn hurt those that have invested a lot in the hope of a tourist boom."
He predicted two more difficult years for consumers.
FOR FURTHER INFORMATION www.consumerassist.co.za 0861 21 22 23 debt counselling call centre
Andre Snyman - CEO - Consumer Assist
aurelia.espag@consumerassist.co.za / 011 654 6018 (Languages: English, Afrikaans)
Source: Weekend Post
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