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Debt timebomb; Relief coming for consumers

 The National credit Amendment act - has been put in place to makeit illegal for South African consumers to collect debt - longer than threeyears. Statistics by the National CreditRegulator revealed that more than  R160 billionis outstanding in unsecured lending- with more than 76% of consumers'salaries ushered to debt payments We spoke to Efficient group economist - Freddie Mitchell   (Click for Audio)   Cape Town - Consumers who are neck deep in debt are set for another windfall,with legislation in place to make it illegal to collect debt that is more thanthree years old.South Africans with paid-up default judgments againsttheir names at credit bureaux had their adverse records cleared on April 1 andnow they are set for more relief.However, for this to happen, theNational Credit Amendment Act, which was adopted by the National Assembly inFebruary, has to be signed into law first.Tougher newmeasuresThe act will see tougher new measures governing creditproviders, including a uniform affordability test for prospectivelenders.It will also outlaw the collection of debt that is more thanthree years old. This is known in legal terms as "prescribed" debt.DebtRescue CEO Neil Roets explained that in terms of the present Prescription Act, adebt is considered to be prescribed if a consumer, in the previous three years,has not:- made a payment- at no stage signed an acknowledgement ofdebt document- admitted that the debt is outstanding- beensummonsed- promised to pay the debtHounding consumers fordebts"By making use of blatantly unethical methods to get indebtedconsumers to acknowledge that they still owe the money, debt collectors houndconsumers for debts which have now ballooned to many times the original sumbecause of interest that sometimes stretches back a decade or more."Hesaid the new act, once signed by the president, would put an immediate stop tothe process that has grown into a huge industry where banks and micro lenderssell off prescribed debt to specialised debt collection firms at adiscount.Often these companies threaten consumers with penalties,letters, midnight phone calls and e-mails.Debt as acommodityRoets said under the new legislation, this will be outlawed andprescribed debt will no longer be a tradable commodity.The Associationof Debt Collectors, which represents 78% of formal debt collectors, warned thatthe act will force credit providers to be more aggressive to collectdebt.Deputy Credit Ombud Reana Steyn pointed out that there is alikelihood that consumes could face a flood of judgements to ensure that debtsare collected before they prescribe."This could lead to garnishee ordersand the attachment of property on a far greater scale than we are seeing at themoment."- Fin24
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  The National credit Amendment act has been put in place to make it illegal for South African consumers to collect debt  longer than three years.   Statistics by the National Credit Regulator revealed that more than R160 billion is outstanding in unsecured lending with more than 76% of consumers' salaries ushered to debt payments   We spoke to Efficient group economist - Freddie Mitchell    

  (Click for Audio)      

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April 23, 2014 - 10:21am