Money Talk Dig yourself out of Debt

Hands up who receives more pre-approved loan grants than actual credible mail in their postbox. You too? Ever asked: Why doesnt someone do something about this virus? Youre not alone each and every one of us usually goes through the mail with a big pair of scissors, usually after powering up an industrial size shredder. Unfortunately, as if being spammed by pathetically nonsensical credit lures wasnt bad enough, one has to also be aware of those individuals who make their careers out of credit fraud by going through your trash and filling out the application forms on your behalf! Always shred and/or cut up all unsolicited credit application forms received in your mail box. This should be common sense for most people.

Fortunately, this disease has a cure and it comes in form of the new Credit Bill.

The introduction in June 2006 of the National Credit Act 34 of 2005 (passed into law in March 2006), which falls under the Department of Trade and Industry, heralds a new chapter in the lending and borrowing transactions in South African commerce.

The South African sectional title market is bound to benefit ultimately as it is massively indebted to the municipalities and mortgage lenders with distressing levels of debt by many of the Bodies Corporate because its registered owners cannot meet their monthly levies. This problem has existed for many years and necessitated an amendment to the Sectional Titles Act which will come into operation on implementation of the new Local Government Municipal Rates Act 6 of 2004 switching the liability of municipal rates accounts from Bodies Corporate to the individual unit owners.

According the SA Reserve Bank, the extent of the debt problem is reflected as South Africans owing R522 billion on mortgage loans (yes, your calculations are correct, thats half a trillion rand), a large percentage of which is attributable to the sectional title sector. In addition, municipalities have a combined national debt of approximately R10 billion accumulated by the sectional title sector for unpaid assessment rates and services. Although mortgage lenders have the security of the units, municipalities battle to recover the amounts outstanding to dissolve the debt. Government is concerned that the mortgage rate deficit is growing on the back of falling property values (year-on-year) and rising household debt of 17% per annum measured against our CPI of approximately 5% per annum.

The purposes of the act are to promote and advance the social and economic welfare of South Africans, promote fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers.

On the one hand the Act requires all institutions that provide consumer credit including banks, vehicle financiers, furniture companies, clothing stores, other retailers, service providers and micro-lenders be registered with the National Credit Regulator in order to stop reckless and unethical lending. This also imposes an obligation on the National Credit Regulator to make provision for debt counsellors and debt restructuring for indebted consumers.

On the other hand the Act places a number of regulations on consumers to declare all existing credit, indebtedness and normal budgeting procedures when applying for new credit to ensure they avoid being blacklisted.

The National Credit Regulator is charged with carrying out education, research and policy development; investigating complaints and ensuring enforcement of the act. Both consumers and lenders will have access to a National Consumer Tribunal, an independent body provided for by the Act, which will deal with contraventions thereof. The expectation is that this legislation will stabilise, over time, the accelerated credit currently exposing thousands of South Africans to the ultimate penalty insolvency.

By Graham Barclay Ewing

Courtesy SA Complex News

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