Red card for credit
The country's major banks have promised to stop "forcing credit down people's throats".
This comes after concerns about the harassment of consumers with offers of unsolicited credit.
Economists have warned that many South Africans have fallen into a debt trap, with an increasing number of families struggling to meet their monthly credit payments.
More people are falling into arrears on their credit card and mortgage repayments and there has been an increase in company liquidations.
On Thursday, the chief executives of Absa, Standard Bank, Nedcor and First National Bank - which make up the Banking Association - unveiled a code of conduct on how to approach consumers with offers of credit. The emphasis would be on "responsible credit extension".
The code of conduct will not affect companies such as Virgin Money, kulula.com, Edgars, Woolworths, South African Airways and Clicks, which offer credit cards as joint ventures with the banks.
Last year, Reserve Bank Governor Tito Mboweni was approached in an airport lounge by a consultant offering him a credit card. This prompted him to meet the "big four" to convince them to curb credit-card lending, saying it was "madness".
In a statement the banks said the move came in response to public concerns over people being harassed by credit sellers, and over the overselling of credit.
On Thursday, Jacko Maree, the head of Standard Bank and chairman of the Banking Association, said the code came in response to media reports and complaints lodged with the ombudsman.
He said three years ago the public had complained of a non-availability of credit, especially to low-income earners. "Now banks have been forcing credit down people's throats."
Under the new code of conduct, when consultants contact potential customers, they must tell them they are calling about an offer of credit and ask whether they would like to continue the conversation.
If the answer is "no" the consultants must immediately end the call. If customers say "yes" and continue the conversation, the call will be ended at any time if the customer indicates he or she is no longer interested.
In addition, banks will contact customers to offer credit only after they have assessed that they have the ability to repay the account.
According to the latest Reserve Bank Quarterly Bulletin, household debt to disposable income is more than 70 percent - the highest level ever recorded - while household savings as a percentage of disposable income is effectively zero - the lowest level ever recorded in South Africa.
Last month Gabriel Davel, the head of the National Credit Regulator, the new government body set up to control lending institutions, warned that the debt levels of South Africans had risen over the past six months.
"We have a number of cases we are looking at, not just credit cards. We are worried about vehicle contracts with large residual values - for example after five years one still owes as much as 60 percent of a vehicle," he said.
The principles of the new code will remain in force as a minimum standard even after the National Credit Act (NCA) has come into effect in June.
"The NCA reflects the minimum legal requirements for an efficient and responsible credit industry," said managing director of the association Cas Coovadia. "The code is a voluntary effort by the banking industry to set a standard beyond this minimum."
Article from http://www.iol.co.za/
Just remember, credit card are necessary to hire cars at www.southafrica-carhire.com
This comes after concerns about the harassment of consumers with offers of unsolicited credit.
Economists have warned that many South Africans have fallen into a debt trap, with an increasing number of families struggling to meet their monthly credit payments.
More people are falling into arrears on their credit card and mortgage repayments and there has been an increase in company liquidations.
On Thursday, the chief executives of Absa, Standard Bank, Nedcor and First National Bank - which make up the Banking Association - unveiled a code of conduct on how to approach consumers with offers of credit. The emphasis would be on "responsible credit extension".
The code of conduct will not affect companies such as Virgin Money, kulula.com, Edgars, Woolworths, South African Airways and Clicks, which offer credit cards as joint ventures with the banks.
Last year, Reserve Bank Governor Tito Mboweni was approached in an airport lounge by a consultant offering him a credit card. This prompted him to meet the "big four" to convince them to curb credit-card lending, saying it was "madness".
In a statement the banks said the move came in response to public concerns over people being harassed by credit sellers, and over the overselling of credit.
On Thursday, Jacko Maree, the head of Standard Bank and chairman of the Banking Association, said the code came in response to media reports and complaints lodged with the ombudsman.
He said three years ago the public had complained of a non-availability of credit, especially to low-income earners. "Now banks have been forcing credit down people's throats."
Under the new code of conduct, when consultants contact potential customers, they must tell them they are calling about an offer of credit and ask whether they would like to continue the conversation.
If the answer is "no" the consultants must immediately end the call. If customers say "yes" and continue the conversation, the call will be ended at any time if the customer indicates he or she is no longer interested.
In addition, banks will contact customers to offer credit only after they have assessed that they have the ability to repay the account.
According to the latest Reserve Bank Quarterly Bulletin, household debt to disposable income is more than 70 percent - the highest level ever recorded - while household savings as a percentage of disposable income is effectively zero - the lowest level ever recorded in South Africa.
Last month Gabriel Davel, the head of the National Credit Regulator, the new government body set up to control lending institutions, warned that the debt levels of South Africans had risen over the past six months.
"We have a number of cases we are looking at, not just credit cards. We are worried about vehicle contracts with large residual values - for example after five years one still owes as much as 60 percent of a vehicle," he said.
The principles of the new code will remain in force as a minimum standard even after the National Credit Act (NCA) has come into effect in June.
"The NCA reflects the minimum legal requirements for an efficient and responsible credit industry," said managing director of the association Cas Coovadia. "The code is a voluntary effort by the banking industry to set a standard beyond this minimum."
Article from http://www.iol.co.za/
Just remember, credit card are necessary to hire cars at www.southafrica-carhire.com
Labels: South Africa - Economy
