Ruling against banks doesn’t get consumers off the hook

A Johannesburg High Court ruling, that banks can’t take money from clients’ current accounts to pay off credit card debt, could be viewed as a relief for bank customers who have experienced what is called “set-off”. But consumers are cautioned to avoid seeing this as a debt management solution or remedy.

Benay Sager, Chief Operating Officer of DebtBusters, says consumers shouldn’t overlook the fact that, although the banks can no longer just claim credit card debt from another account, it’s still owed.
“This ruling is generally positive as it ensures that consumers will not end up with unnecessary cash flow shortages.”

“However, consumers shouldn’t think that this ruling means the banks will ignore the debt. There are other avenues for creditors to reclaim unpaid debt, up to and including going to court for a judgement”, he adds.

Sager warns that by the time a bank has resorted to setting off credit card debt, the customer may already be in bigger financial trouble.

He says although there were problems with set-off and customers were not always told timeously that the bank had taken the money, it could be the wake-up call needed for people to take control of debt and consider seeking professional help from a debt counsellor.

“Banks would mostly only apply set-off after a customer had been warned for missing a number of repayments. Often someone who’s ignored repeated requests to pay off one debt is doing the same with others.”

He says, on average, DebtBusters’ clients have six credit agreements, which although is fewer than 10 years ago, are for larger amounts and the majority of those agreements include credit card accounts and personal loans.

“When people start ignoring creditors, rather than dealing with debt or trying to make repayment arrangements, they usually need professional help.”
Debt counselling, such as that which DebtBusters provides, offers a debt management solution that is regulated by the National Credit Act and offers consumers a way to renegotiate interest rates, extend their payment terms while protecting their assets. 

“Despite this, people just wait too long before seeking help. To fix a financial problem, consumers who would happily consult a lawyer, tax advisor, accountant or other professional are often still reluctant to speak to a debt counsellor.

“The bottom line is that even though banks can no longer use set-off to recover credit card debt, don’t ignore their warnings. Do something about it, and if you’re not sure what or how, get some professional help from a debt management specialist as soon as possible.”