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BIGGEST DEBT TRAPS IN SOUTH AFRICA

Date: 2017-10-18



It seems like there is a long road ahead for the South African consumers, despite the SA Reserve Bank reporting a better outlook and steady recovery in economic activity over the next 6 to 9 months.

 

The latest information on consumer credit behaviour – released by credit bureau Compuscan – revealed that more consumers had moved into higher delinquency categories from Q2 2016 to Q2 2017. 

Most notable was the increases in the number of consumers with accounts that were 3 – or more – months in arrears. While the number of credit-active consumers listed on the bureau remained consistent at just over 19 million South Africans, Compuscan pointed to a significant increase of 10% year-on-year in the number of consumers with “3+ months in arrears” as the worst position on their credit records. A 6% decrease in the total number of persons whose worst position was “one to two months in arrears” was also noted. 

The same trend was noted for account levels, as the bureau reported a 5% year-on-year decrease in accounts that were one to two months in arrears and an 11% year-on-year increase in accounts that were 3+ months in arrears.

Considering the results on both consumers and account level, the study also revealed that consumers had struggled to stay on top of their vehicle and asset finance (VAF), fixed-term agreements, credit cards and store cards.

There had been a 30% year-on-year increase in fixed-term agreements that were 3+ months behind in payment as well as 14% increase in adverse enforcement on accounts with the same loan category. 

The bureau also noted a 33% increase in store cards that had been subject to adverse enforcement meaning that these accounts had been handed over, written off or that the facilities had been revoked.

The younger generation, in particular, were among the age group that fared the worst in terms of adhering to their fixed-term agreements, such as retail furniture loans.

While the data revealed an overall 13% increase in fixed-term agreements that had been granted to 18 to 29-year olds, the majority (51%) of this age group were 3+ months behind in payments or had been subject to at least one adverse enforcement.

Across all age groups, 31% of fixed-term agreements that were 3+ months in arrears belonged to consumers aged 18 to 29, the credit bureau said.


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