Life industry funds counseling service for public servants struggling with debt
The life industrys financial literacy training workshops have reached more than 2 500 government employees over the past six months, with almost half admitting to struggling financially as a result of debt repayments.
Lerato Mametse, Communications Manager at the LOA, says this finding emphasises the need for combining financial literacy training with financial wellbeing consultations.
"There is no point in teaching people how to budget and save if they are struggling with debt. Before we can expect participants to apply what they have learnt at the workshops, we need to help them reverse their negative cash flow situations where income after living expenses is less than actual debt installments. We do this by giving all participants access to financial counselors via a confidential telecare service."
The telecare counselors analyse each case in detail and then find appropriate ways to help the person. These may include helping them identify unnecessary expenses, restructuring their debt by renegotiating repayments, and getting them out of the clutches of unscrupulous loan sharks, often through legal action. Workshop participants with emolument attachment orders (court orders allowing for debt collection) against them can also use the telecare service to have their orders audited to ensure that the correct amount is being deducted.
The LOA's Financial Wellness Programme is run by The Careways Group, which specialises in providing corporate employee wellbeing services, including helping employees gain control of their finances.
The Careways Group has found that the single biggest reason why people earning R12 000 or less a month experience negative cash flow is not excessive debt, but rather excessive repayments brought about by exorbitant finance charges. It was found that people with short-term (or consumption) type debt are commonly paying finance charges of up to 157% a year. Invariably, this often forces people to take on more debt to finance the older debt.
The majority of debt still consists of micro loans and retail debt (store cards), but increasingly people earning less than R12 000 a month are also falling into the overdraft and credit card trap.
Mametse outlines the help offered by The Careways Group telecare counselors when approached by workshop participants suffering from negative cash flow:
Analyse living expenses
Reduce "dont have to have" costs
Challenge lenders guilty of reckless lending
Negotiate with lenders reduced installments
Create a personal budget and a financial plan
Follow up within four to six months
Mametse says the telecare counselors have a very high success rate in helping people turnaround their financial situation.
Statistics on the LOAs Financial Wellness Programme for government employees:
* Number of workshops delivered: 155
* Number of public servants trained: 2 596
* Telecare sessions: 143 (76% related to over indebtedness, 20% related to black listing and debt, 4% related to other financial queries)
Ongoing LOA consumer education efforts
In addition to the focus on lower income consumers, the LOA produces regular consumer advice articles on issues that have been identified by the LOA Consumer Affairs Committee, the Long-term Insurance Ombudsman's office or the LOA office as areas where consumers may need generic advice or guidance.
Mametse says the LOA is also currently working on specific consumer education programmes to be launched later this year and early next year focusing on the following issues:
* What the Statement of Intent means for you. A R2-million budget has been set aside for this.
* An ongoing jargon buster programme explaining terminology and processes used by new generation risk products.
* What to look for in the life industrys FSC Access 'CAT" standard products (offering fair Charges, easy Access, decent Terms) for low income households.
