In this article, we share everything you need to know about over indebtedness. This includes the best tips from industry experts and remedies available to help you deal.

What is over indebtedness?

A consumer is considered to be over indebted if money available after payment of essential expenses is not enough to pay all other debts.

What are some of the indicators of over indebtedness?

• borrows money to pay other loans;
• skips payments on some accounts in order to pay others;
• receives letters of demand and/or summonses from creditors;
• is thinking of being placed under debt administration or debt counselling;
• has judgments passed against him/her;
• is always absent from work, especially towards month end;
• regularly feels emotionally stressed about money matters; and
• is regularly losing money to rip-offs and frauds.

What are the causes of over indebtedness?

There are different reasons why people end up being over-indebted. Below is a list of some of the most common reasons:

• Indulgence – living in the first-class lounge whilst you clearly cannot afford that lifestyle;
• Ignorance of financial products – An example would be having too many funeral policies that you clearly cannot afford. You need to see a financial advisor for assistance in choosing an insurance cover that is sufficient and affordable for you and your family.
• Lack of proper planning
• Social pressures – peers, family
• Change in circumstances – divorce, retrenchment, death, etc.
• Reckless lending
• Economic upswing – increasing interest rates

How to check if you are overindebted?

Use this free calculator or apply for Debt Counselling Here.

HOW OVERCOMING OVER INDEBTEDNESS & PERSONAL FINANCIAL MANAGEMENT?

TIP # 1 Don’t ignore your debts

• Know how much is coming in, and how much is going out;
• List all the people you owe, including friends, family, neighbors etc;
• Get a copy of your credit bureau record – free of charge;
• Keep in touch with your bank statement – track all the deductions;
• Get in touch with your creditors and explain your situation. Reduced payment is better than no payment;
• Don’t be threatened or bullied into promising to pay what you don’t have; and
• Review your budget regularly.

TIP # 2 Prioritise your debts

• Pay your essential expenses first – electricity, rent, insurance;
• Then pay your day-to-day expenses like transport and food;
• Pay off debts with the highest interest rate first, and the rest in descending order;
• Seek expert advice before selling/canceling anything;
• Don’t cancel important insurance policies such as car, household etc.; rather shop around for cheaper premiums

TIP # 3 Don’t borrow to pay off debts

• Credit creates more debt, don’t borrow more to pay existing debts;
• Don’t buy food on credit;
• If you get retrenched, use the retrenchment package to pay off debt;
• Be very cautious when considering taking a consolidation loan

TIP # 4 Cut down on your expenses

• Cut down on luxury items – entertainment; TV subscriptions, holidays, etc;
• Make a list of “wants” and “needs” and focus on needs;
• Surrender goods that you can no longer afford to pay before they are repossessed;
• Consider early settlement so that you can save on interest and other costs;
• Review your insurance policies from time to time – use an independent financial advisor.

TIP # 5 Don’t wait until goods are repossessed

TIP # 6 Start saving

• Put aside some money for unforeseen circumstances;
• Be consistent, save every month – no matter how small the amount is.

TIP #7 See a Debt Counsellor & apply for assistance (click here for more information)

ABOUT CREDIT INFORMATION

Every person who has an account with a credit or service provider in the country or makes use of credit services will find their payment behavior information recorded with a credit bureau irrespective of whether that person pays their account regularly or not. Credit bureaus hold both positive information, such as consumers paying their accounts on time, and negative information, for example when a consumer has fallen behind or defaulted on payments.

The purpose of listing information collectively at the credit bureaus is to create a comprehensive view of the consumer for both prospective and existing credit and service providers, to assist them in evaluating new credit or account applications, and also to assist in the management of their relationships with their customers.

HOW TO ACCESS YOUR CREDIT REPORT

Consumers are entitled to one free credit report annually from each of the registered credit bureaus. Should a consumer require an additional copy of his or her credit report within the same year, there will be a fee that credit bureaus will charge.

To get a copy of your credit report, contact any of the below credit bureaus. Remember, you are entitled to get one free credit report once a year.

CompuScan	0861514131	www.compuscan.co.za	info@compuscan.co.za
Experian	0861105665	www.experian.co.za	consumer@creditexpert.co.za
TransUnion	0861886466	www.transunion.co.za	webadmin@transunion.co.za
XDS	0860937000	www.xds.co.za	info@xds.co.za
Consumer Profile Bureau	0105909505	www.consumerprofilebureau.com	support@cpbonline.co.za
VeriCred Credit Bureau	0871503602	www.vccb.co.za
Credit Ombud	0861 662837	www.creditombud.org.za	ombud@creditombud.org.za

In terms of the National Credit Act, consumers have a right to access and challenge information on their credit records if they believe that it is not accurate.

When challenging the credit bureau record, the consumer needs to contact the credit bureau that issued the credit report. The credit bureau has 20 business days to investigate the matter.

If the consumer is not satisfied with the outcome from the credit bureau investigation or they do not have an answer after waiting for 20 business days for the bureau to assist them, they should escalate the matter to the Credit Ombud’s office where they will receive assistance free of charge. However, consumers need to have a reference number from the credit bureau first.

HOW LONG DOES MY INFORMATION STAY AT THE CREDIT BUREAUS?

Below is a table on retention periods:

	Category	Description	Time kept
1	Details and results of complaints lodged by consumers	Number and nature of complaints lodged and whether the complaint was rejected. No information may be displayed on complaints that were upheld	6 months
2	Enquiries	Number of enquiries made on a consumer’s record, including the name of the entity/person who made the enquiry and a contact person if available	1 year
3	Payment profile	Factual information pertaining to the payment profile of the consumer	5 years
4	Adverse classifications of consumer behavior	Subjective classifications of consumer behavior	1 year or within the period prescribed in section 71A.
5	Adverse classifications of enforcement action	Classification related to enforcement action taken by the credit provider	1 year or within the period prescribed in section 71A.
6	Debt restructuring	As per section 86 of the Act, an order was given by the Court or Tribunal	Within the period prescribed in section 71(1) of the Act or until a clearance certificate is issued
7	Civil court Judgments	Civil court Judgments including default court judgment	The earlier of 5 years or until the judgment is rescinded by a court or abandoned by the credit provider in terms of section 86 of the Magistrates Courts Act 32 of 1944 or within the period prescribed in section 71A of the Act
8	Maintenance judgments in terms of the Maintenance Act 99 of 1998	As per court judgment	until the judgment is rescinded by a court
8	Administration Orders	As per the court order	5 years or until the order is rescinded by court
9	Sequestrations	As per the court order	5 years or until rehabilitation order is granted
10	Liquidations	As per the court order	Unlimited periods
11	Rehabilitation	As per the court order	5 years

THE RIGHT TO APPLY FOR CREDIT

Every person has the right to apply for credit from any credit provider. However, it does not prevent the credit provider from turning down your application. When your application is turned down you have the right to be provided with reasons.

THE RIGHT TO DISCLOSURE

A credit provider must provide you with a pre-agreement statement and quotation before you can sign the credit agreement. This must disclose the amount borrowed, deposit to be paid (if any), number of installments, interest payable, any additional charges, credit life insurance, date of first installment and the date of last payment. Always make sure that you get a pre-agreement statement and quotation before signing.

RIGHT TO INFORMATION IN AN OFFICIAL LANGUAGE

You have the right to receive any document that is required in terms of the NCA in an official language that you read or understand.

THE RIGHT TO BE GIVEN DOCUMENTS IN PLAIN AND UNDERSTANDABLE LANGUAGE

You have the right to receive information and documents in plain language. This means that the contents, meaning, and importance of the document must be easy to understand. Ask if you do not understand. Do not sign unless you understand the terms and conditions of the agreement.

THE RIGHT TO CONFIDENTIAL TREATMENT

You have a right to have information held about you treated confidentially. This means the credit provider may only use the information for the purpose for which it was given.

THE RIGHT TO ACCESS AND CHALLENGE INFORMATION HELD BY A CREDIT BUREAU

You have the right:

1. To be informed that the credit provider intends to report negative information about you to a credit bureau before the credit provider actually reports you.
2. To receive a copy of your credit record from a credit bureau when you request it. You can get one free record per year, but the credit bureaux may charge you a fee  of R20 excluding Vat for any further records;
3. To challenge information kept by a credit bureau if you are unhappy with the information;
4. For your information to be kept confidential, and for your information to be used only for purposes allowed by the National Credit Act.

THE RIGHT TO GET ASSISTANCE WHEN YOU ARE OVER INDEBTED

If you experience problems with servicing your debts take the following steps:

1. Contact your credit provider to discuss your situation and negotiate an affordable repayment plan;
2. If you cannot reach an agreement with your credit provider, you may contact a debt counsellor in your area;

Note that when you are under debt counselling you will not be able to get further credit until you have settled all your debts.

Source: The National Credit Regulator

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