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					 Consumerfair July–August 2007 • Published by the National Consumer Forum ABSA – FiNANCiAl liteRACY FeAtURe

Using your credit card to
Article by Absa Bank Many South Africans find that a credit card is a useful tool for managing their finances, while allowing them to make both short-term and long-term purchases. budget. Absa recommends that you save at least 10% of your monthly income.

manage your personal finances
Use responsibly
Carrying a credit card is much safer that carrying cash, as the Lost Card Protection facility covers you in the event of theft. But you need to use the card responsibly. Paying your card debt in full each month means that you pay no interest on the purchases you make with your credit card. Also, you get the benefit of always having finance available when you need it. Debt is not necessarily a bad thing,

But think first…
Before deciding to apply for a credit card, it is a good idea to develop a budget, including all of your regular monthly expenses. This will show you how much more you can afford to buy on your current income. Don’t forget to include savings as part of your monthly

provided it is used appropriately and managed responsibly. Your credit card could enable you to pay for major repairs to your home or to pay for a course of study. This is a sensible use of credit that will deliver a long term benefit – unlike buying an expensive item of clothing or paying for an extravagant night out. The Governor of the Reserve Bank, Mr Tito Mboweni, has been cautioning South Africans for years on overspending in order to live a luxurious lifestyle. Responsible use of the credit available to you will ensure that you are free

from worries about debt and that you are able to plan for important investments – like a good education and a comfortable retirement.

part of the ‘budget’ facility and how much is still outstanding on these.

Getting creditworthy
Your access to credit represents the recognition by a bank that you are an income earner who is likely to conduct his or her financial affairs in a responsible way. If you can keep a good record of credit worthiness on your credit card, this will put you in a better position when you apply for a larger loan – for a home loan or car finance – in the future. In situations like these, your positive credit record is a big advantage.

A tool for managing your budget
A credit card statement, if wisely used, can become an important budget management tool. Your statement shows you exactly what you are spending each month on food, entertainment clothing and transport. If you have a linked garage card, it will list your fuel purchases separately. It will also show you which major purchases you are paying off as

Guide to choosing a

credit card
Article by Credit Health With more than 30 credit cards on offer, choosing the right one can be a nightmare. It pays to investigate the options as each credit card has different terms, benefits and reward programmes.

Don’t be fooled
Don’t be fooled by the colour of the card – that’s just clever marketing. Blue, Silver, Gold or Platinum – they all have one thing in common: they show you don’t have cash to spend.

Base your decision on the hard facts
Get the card with the lowest annual card fee, or preferably no fee at all. Competition outside South Africa results in banks making money by charging monthly interest on the unpaid balance. Unfortunately, in South Africa annual card fees are widely accepted.

What will it cost you?
Another key cost is the interest rate charged. Obviously this is the sin-

gle most important cost other than the annual card fee. Ask what the rate is and try to find one at prime or below. Remember the better your credit record and associated credit rating the more you can negotiate for a lower rate of interest. Ask yourself why you are borrowing from the same bank at the prime rate through your cheque or overdraft and paying nearly double that rate on your credit card! Insist on paying the same rate or approach another bank. Many consumers think they will pay off the full balance at the end of the month and will never have an interest bill. That’s simply wishful thinking. You have to assume you may not be able to pay off the full balance and if that happens you will have to pay interest on the amount spent. The normal credit card terms provide that you must pay interest on the full amount spent unless you settle the outstanding balance in full. The credit card issuers hope that you only pay the minimum instalment amount. It has been calculated that because the

minimum instalment is only a small percentage of the outstanding balance, it will take 22 years to pay off any balance owed if you only pay the minimum instalment due. Don’t fall into this trap. Wherever possible, pay the full balance owing at the end of the month in question. It is for this reason that you must choose a credit card with the lowest interest rate.

Loyalty and reward programmes
The programmes are sold as being extremely valuable and you are told

that you can convert the points into money, careful reading will show you that there is little real benefit given the amount you have to spend to qualify for the reward. It’s just a marketing gimmick and it’s designed to get you to pay their annual card fee and spend as much as possible, so they can charge you as much interest on your purchases as possible. So, don’t be tricked – the rewards are not worth basing your decision on.

QUICK TIP: Pay the full outstanding balance of your credit card monthly. If you can’t do this, it means that you’ve bought things in the past with money you don’t have.
More Information
www.credithealth.co.za

Credit card debt is sky rocketing. Its one of the most expensive debts you can have. A credit card should be your friend, not your enemy. But you have to learn to use it in the right way, and not notch up so much debt that you cannot repay your card every month. Remember, there are no transactional fees attached to credit cards, so they’re much better than something like cheques. Even the rates on credit cards are negotiable – but however not as much as the rate on a home bond or a car loan. Even now, with interest rates still relatively low, credit card rates are still in the high twenties. The first thing you need to know is that if you pay off your card each month, you do not pay interest. An added bonus is that if you deposit money into your card, some banks will pay you a rather attractive interest rate. If you are really disciplined, Peter Carruthers, a small business consultant, says you can run your entire business with a credit card, therefore avoiding fees and raking up points for your frequent flyer miles

Sponsored by Absa Bank in the interests of financial literacy

Putting consumer issues on the agenda



ABSA – FiNANCiAl liteRACY FeAtURe
NATIONAL CREDIT ACT

What you need to know
Article by Absa Bank The National Credit Act (NCA) was passed to protect consumers from unscrupulous lenders; it will ensure that lenders comply with fair lending practices when giving credit. credit – when opening an account at a shoe shop, for instance. But you are often unaware of what you are signing, and of the costs and risks involved when entering into a credit agreement. Many credit providers have cashed in on this lack of knowledge, which led the government to review South Africa’s credit laws.

about the NCA
Why was the NCA passed?
The NCA was drafted with the aim of protecting the consumer; this is part of government’s drive to create more awareness of consumer rights and protection of consumers. As a consumer, you often sign up for

Over-indebtedness
The government introduced the NCA to benefit and protect consumers when it comes to credit. The law tries to prevent consumers from falling into a po-

sition of over-indebtedness, by: ■ Promoting the responsible granting of credit, and ■ Regulating the costs of credit. For many South Africans, access to credit is vital. In a world without credit, you would have to pay cash for your home, your car, your furniture – everything! While saving for what you want is always a good idea, credit can improve quality of life and build opportunities for generating greater wealth.

Responsibility to refuse
The NCA places a greater responsibility on credit providers to refuse you credit if you cannot afford it and it will regulate the way credit bureaus conduct business. All credit transactions i.e. home loans, vehicle finance, micro loans and clothing and retail accounts, fall under the new legislation.

How will the NCA affect the limit on my credit facility?
Under the NCA, a credit provider cannot automatically increase the limits on your credit card, overdraft or any other credit facility. If you requested the option of having your credit limit increased from time to time when you applied for the credit facility, the credit provider may increase your credit limit. But the amount of the increase will be less, and it will be done less often.

provider must give you the following options: ■ to decline the option of automatic annual credit limit increases; ■ to be excluded from any telemarketing campaign of the credit provider; ■ to be excluded from any marketing or customer lists that may be sold or distributed by the credit provider; and ■ to be excluded from any mass distributions of emails or SMSs.

Informed choices
The NCA introduces new rights for consumers, as well as measures that allow consumers to make informed decisions before buying goods and services on credit. When offering credit, a lender must now be very clear about exactly what interest rate is being charged, what other fees must be paid, and how much this all adds to the original (cash) price.

What about unsolicited selling?
In the past, many consumers have found themselves bound to contracts after unannounced visits by aggressive salespeople. Now, the selling of credit at your home or place of work can only be done if the salesperson makes an appointment to see you. The Act specifically prohibits any credit provider from harassing you to persuade you to apply for credit or to enter into a credit agreement. It prohibits credit agreements from being entered into at a private dwelling, except when you have arranged for a credit provider’s representative to visit your home.

Many lenders have cashed in on consumers’ lack of knowledge. The NCA promotes responsible lending and regulates the cost of credit

Shops must get your information right
Credit bureaus are also controlled by the NCA and are regulated. This way, credit information is strictly controlled and monitored, especially the accuracy of that information and the length of time it is kept for. It also places obligations on credit providers, who forward information on your payment and credit habits to the bureaus. According to the NCA, businesses and shops that provide credit bureaus with information about your payment habits, must be careful that the information they report is accurate, up to date, relevant, complete, valid and not duplicated.

Rights and obligations of the consumer
The NCA was designed to provide consumers with additional protection against unscrupulous lenders. However, this protection which provides consumers with a range of rights also requires them to act responsibly if they are to make use of their rights.

What fees will I be charged for credit?
The NCA specifies what you may be charged when you enter into a credit agreement. Broadly, a credit provider can require you to pay: ■ An initiation fee, which may not exceed a prescribed amount and may never exceed 15% of the principal debt. You cannot be charged an initiation fee unless you actually enter into the credit agreement and you must be offered the option for paying this fee upfront rather than adding it to your debt. ■ The cost of any extended warranty agreement. ■ Connection fees, levies or charges. ■ Taxes, licence or registration fees. ■ Credit insurance. The Act sets the maximum service fee at R50 a month.

Consumers should:
Be honest in their financial disclosure to the lender when applying for a loan. If at a later date consumers find themselves in financial difficulty, it will be to their detriment if they have not fully disclosed all of their obligations and debt. ■ Read and understand the loan contract which will disclose all the terms and conditions of the loan, the consumer’s responsibilities in terms of that loan and the costs associated with borrowing the money. ■ Utilise the time given to them by the Act to fully consider the quotation provided by the credit provider. The Act provides for five working days for this purpose. ■ Immediately contact the bank should they experience financial difficulties. The Act provides for consumers to seek guidance from independent debt counsellors who will consider the consumer’s position and make a recommendation on that consumer’s financial portfolio. If approved by a court, then this recommendation will be binding on the credit provider. ■ Ask the credit provider for reasons why any application has been declined. If the reason is due to poor credit bureau records, then the consumer can challenge those records with the bureau and have them corrected. ■ Consider the costs attached to the loan agreement to determine whether they are prepared to accept these costs or would like to make use of other parties who may have a different fee structure. ■ Exercise their right to complain and to take remedial actions if they feel they have been unfairly dealt with, or if their rights have been compromised. They can contact the National Credit Regulator (NCR) at 0860 627 627 or www.ncr.org.za; or the Banking Ombud at 0860 800 900 or www.obssa.co.za.
■

Good news: getting told if you’re reported
The good news for consumers is that you also have the right to be advised by a credit provider before any negative information about you is reported to a credit bureau, and credit bureaus must take reasonable steps to verify the accuracy of any consumer credit information that is reported to them by credit providers Will the NCA change the way credit providers market their products? Yes. Misleading advertising and negative option selling will not be allowed. Negative option marketing is when you enter into a credit contract without your express consent. The Act states that when you enter into an agreement for credit, the credit

Consumers should not:
Over-inflate income when applying for a loan. This may result in the loan being approved, but if that consumer later experiences financial difficulties, then their right to debt counselling and the possible benefit of this process will have been undermined. ■ Under-state their monthly expenses. Consumers should be honest and rather be practical in examining and disclosing their monthly expenses. ■ Be influenced by any sales person to merely accept a loan quotation as they have the right to shop around to get the deal most suited to their needs. ■ Allow their personal information to be abused by any party involved in their loan application. Credit providers must have consumer’s written consent to disclose their personal information to third parties.
■

More Information
Who do I contact for more information on the NCA, or to complain if my new credit rights are not being met? ■ The contact number for the NCR is 0860 NCR NCR (0860 627 627) ■ Further information can be obtained from the NCR’s website at www.ncr.org.za or send an email to info@ncr.org.za.

Sponsored by Absa Bank in the interests of financial literacy

10 Consumerfair July–August 2007 • Published by the National Consumer Forum Food ABSA – FiNANCiAl liteRACY FeAtURe

My creditors are chasing me for money

what do i do?
By Credit Health When you owe people money, they sometimes give debt collectors the job of getting their money back. What do you do in this situation, and what behaviour can you expect from a debt collector? Debt collectors are governed by the Debt Collectors Council and have to act according to a Code of Conduct. Unfortunately, as with every profession, there are bad eggs and they should be reported and have disciplinary action taken against them. Fortunately there are many debt collectors who know how to deal with debtors in a responsible way. partment or agency in your province (for more information, go to www.debtcol-council.co.za).

Step 2: Check if the debts are very old
Generally, a creditor (like a lender or a clothes store) must start civil proceedings in a court within three years from your last transaction; after that, you have a complete defense against any claim. The Courts will not enforce the debt. This is because the claim may well have ‘prescribed’ (or lapsed) in terms of the Prescription Act, No 68 of 1969.

Beware!
If you make a payment toward an old debt or otherwise agree that you owe the money, you may put yourself at the start of this three-year period, and then be liable for the whole amount. If someone demands payment of a debt going back several years: ■ Demand to see either proof of judgment or evidence that an acknowledgement of debt has been made in the last three years; and ■ Make sure you get legal advice before you make any payment at all, or otherwise acknowledge the debt.

What is the role of the debt collector?
They are given the job of collecting money. That is all. They are not interested in your circumstances. They just want your money. The credit provider (who lent you the money or sold you something on credit) has handed your account over to them to take legal steps to recover the money you owe. They usually get paid a percentage of the amount collected, so they obviously want to recover as much as possible from you.

They get you to sign a form, called an: ■ Admission of Liability, ■ Acknowledgement of Debt, or ■ Consent to Judgment. If you sign this form, it gives the debt collector the right to demand money from you on new terms without any need to check on the original loan or purchase. By signing such a form you also agree that you owe the debt-collecting company all their extra administrative charges. These fees and charges (for letters, notices and so on) can quite easily double the original amount that you owed to the credit grantor. If you sign this form and then refuse to pay the debt collectors, they can refer the debt to their lawyers. Then you will have to pay the debt-collector’s lawyers the original debt, the debt-collector’s fee and any legal costs. Remember you do not owe money to the debt-collecting company. You may owe money to the shop you bought from.

uments (usually five days). Never ignore them as more action will follow. For help, you can contact any of the following: ■ Credit Health on 0860 201 201 ■ A lawyer (a list of attorneys is available at the Law Society of South Africa’s website at www. lssa.org.za) or contact Logan Attorneys nationwide on www.loganattorneys.co.za ■ Staff at the court, who can give you basic information ■ The Government’s Legal Aid Board (Tel 012 481 2700 or Fax: 012 341 8747), although they will

usually not assist with civil matters such as these but you can get a referral from them If you owe the amount claimed, but are unable to pay in full, you can consider acknowledging the debt on a ‘without prejudice’ basis (or, at worst, by signing an Acknowledgment of Debt) and agreeing to pay by instalments. If you do not owe the amount claimed, or only owe part of it, file a Notice of Intention to Defend the claim.

More Information
www.credithealth.co.za

Unacceptable debt collection practices
You have a legal right to complain about harassment and other unacceptable debt collection practices. However, you are still obliged to repay your debts, so try to reach an agreement with your creditors regarding repayment.

Here are examples of illegal and unacceptable conduct: Verify claims by debt collectors
If you are not sure about the amount being claimed by a collections department or agent, you can refuse to pay anything until they give details in writing and supporting documents such as a copy of the contract, statements and invoices. Assault, intimidation, trespassing and harassment. Using physical force against you or to enter your property. Contact the police immediately. ■ Intimidating, frightening or ‘stand over’ tactics. ■ Blocking access to your premises. ■ Trespassing on your premises after you tell them to leave, or returning after you tell them they are not permitted on your premises. ■ Trying to tire you out or exhaust you, for example by phoning more than two or three times per week, or late at night or very early in the morning, unless you agree. ■ Abusive language. ■ Abusive, racist, or obscene language designed to demoralise or humiliate you. ■ Embarrassing or intimidating you through other people. ■ Sending demands for payment through uninvolved neighbours or people at work. ■ Threatening to tell other people about your situation. ■ Contacting you at work even if you ask them not to do so and give them another way to contact you. ■ Talking to your children about your situation or threatening you through your children. ■ False and misleading conduct. ■ Pretending unpaid debts are a criminal offence involving the police or possibly jail. This is false. ■ Pretending your children can be taken from you because you cannot pay your debts. ■ Showing you false notices designed to look like Court documents when they are not. (If you get a letter like this from a debt collection firm or attorney, report them to the Law Society of South Africa: Tel 012 362 1729 or Fax 012 362 0969. Or call the law society in your province.)
■ ■

What must I do?

Debt collectors must act reasonably
Under the law, debt collectors must behave in a business-like way, without misleading, abusing, threatening or harassing you. Creditors and debt collectors are allowed to take reasonable steps to: ■ contact you, on more than one occasion; ■ remind you firmly (but politely) of your obligation to pay; ■ make arrangements to enable your debts to be repaid; ■ warn you about what may happen if you do not pay (including their right to sue you, to recover the costs of enforcement action, and to record a judgment debt on your credit file – which may reduce your ability to get credit in future).

Step 1: Find out if the claims made by debt collectors are correct
If they claim that you owe money on personal loans, credit cards and store cards, you have a legal right to a statement of the amount owed and how it is calculated. This is your right under the Credit Agreements Act (No 75 of 1980) and the Credit Agreement Amendment Acts (No 9 of 1985 / No 53 of 1987 / No79 of 1995) as well as under the National Credit Act (Act 34 of 2005). If a debt collector refuses to send you copies of loan documents or to account for an alleged debt, complain to the: ■ Debt Collectors Council – Tel : 012 804 9808 or 012 804 3402; ■ Association of Debt Recovery Agents – Tel: 011 333 4335 or 011 787 3838 or Fax: 011 333 6960; or the ■ Consumer Affairs Provincial De-

Repossession of cars, mortgaged goods
The Credit Agreements Act No 75 of 1980 gives consumers certain rights concerning repossession of your car, furniture or other property that secures a loan. For instance, you must be given written notice and a reasonable period in which to make up any arrears before your vehicle can be repossessed. Contact your provincial Consumer Affairs Department.

Debt recovery through the courts
Creditors may recover money in court by suing you. This is a civil, not criminal, matter. Depending on the amount claimed, proceedings may occur in either a Small Claims or Magistrates’ Court or usually for very large amounts in the High Court. If you get a court summons or statement of claim, you must respond within the time set out in the legal doc-

Watch out for this trick that some debt collectors use to get money from you

Sponsored by Absa Bank in the interests of financial literacy


				
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