Debt crisis: Get help

01 August 2009 Andre Snyman, Consumer Assist

So many South Africans find themselves in such serious financial dire straits, that they are compounding their problems by getting caught up in scams, relinquishing their rights and taking unnecessarily drastic steps.

There are several heart-wrenching examples of scams and abuses compounding the problems faced by debt stressed consumers. Brokers can add value by ensuring their clients know their rights and understand the options available to them.

Property scams
According to Gabriel Davel, CEO of the National Credit Regulator (NCR), fraudsters are taking advantage of debt stressed consumers. “There are at least five fraudulent schemes under investigation. The following example illustrates their modus operandi: a person who owns a house valued at R400 000, with an outstanding bond of R120 000 and further debt of R100 000, is swindled into signing over the house for R120 000 and the right to rent the property. Instead, the homeowner is swindled out of the house and ends up with R500 000 worth of debt he cannot repay.”

Banks compounding troubles
Andre Snyman CEO of Consumer Assist, the largest umbrella organisation of debt counsellors in South Africa, recounts the experience of a man who was debt stressed, but owned land worth R500 000. “The bank suggested he sells the property on auction, but the highest bid received was R100 000. The bank then told the man they were prepared to write off R185 000, take the house and give him a loan of R200 000 to pay off! His financial situation would have worsened and the bank would have acquired a property with the indebted person as a renter.
“It is most concerning that the banks are not prepared, in many instances, to renegotiate debt, but they have no qualms about repossessing homes or putting clients in a situation where their capacity to get out of debt worsens.”

Knowing your rights
The NCR recently handled a case in which a domestic worker, who got a R600 000 loan on a R6 000 a month salary from one of the big four banks, could not make the repayments. However, irresponsible loaning by the bank gave her a defence and rights in terms of the NCA.

Parents under pressure
Snyman says there has been an increase in the number of parents withdrawing children from school because they could not afford to pay school fees. The children were being victimised at school, including being given pink slips in front of classmates or disallowed from attending matric dances or taking part in sports.

Consumer Assist wrote to former Minister of Education, Naledi Pandor, who replied as follows. “The South African Schools Act in section 40 provides that it is the parent who is liable for paying for school fees – a statutory obligation that is not extended to the learner. Section 41 (7) unequivocally states that a learner may not be deprived of his or her right to participate in all aspects of the programme of a public school despite the non-payment of school fees by his or her parent and may not be victimised in any manner, including but not limited to the following conduct: suspension from classes; verbal or non-verbal abuse; denial of access to cultural, sporting of social activities of the school; or the nutrition programme of the school for those learners who qualify in terms of the applicable policy; or denial of a school report or transfer certificate.”

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