Understanding Your Rights: Navigating Debt and Credit in South Africa

Amidst the commemoration of Human Rights Month, South Africans are encouraged to not only acknowledge, but also educate themselves about their consumer rights, particularly in respect to credit and debt. The need for such understanding has been emphasized by Wikus Olivier, managing director of CreditSmart Financial Service, who underlines that rights associated with the National Credit Act comprise an integral part of an individual's spectrum of human rights.

The conflation of human rights with consumer rights in the realm of finance highlights a crucial narrative—that of being informed about what one is entitled to, alongside the associated responsibilities. Olivier stresses that having certain rights doesn't equate to the abuse of such rights. Specifically, he warns against the overextension of credit, which if unaffordable, can indeed precipitate considerable financial woes.

Credit obligations come packaged with a set of consumer rights that South African consumers must be aware of. These include the right to apply for credit, a privilege enshrined in the National Credit Act for all competent adults and legal entities. Although this right recognizes the potential for credit application denial by banks—owing to credible reasons—it also mandates these rejections to be reasonable and consistent with prevailing laws and the lender's risk calculus.

Reana Steyn, Ombudsman for Banking Services, clarifies that banks can rightfully refuse credit applications, like a home loan, if it doesn't align with affordability criteria. Another pillar of consumer rights is the ability to receive and comprehend information. All contractual information should be conveyed in plain language, possibly in an official South African language, thus ensuring transparency prior to the signing of any agreements.

In case of credit application rejections, individuals have the right to be notified, and to receive justification for such denials. Importantly, when rejections are based on credit profiles or scores, consumers have the right to dispute the decision with the Credit Bureau.

Beyond the right to receive a free annual credit report from registered credit bureaus, individuals can contest inaccuracies, with bureaus obliged to address these disputes within 20 business days. Additionally, confidential treatment of personal data is a guaranteed right, with such information only utilized for its intended purpose.

Safeguards against reckless lending practices are also entrenched in the Act, requiring credit providers to adhere to stringent affordability assessment guidelines at the time of a credit application. Furthermore, when consumers face payment difficulties, the Act allows for negotiation with credit providers, or recourse to debt counselling—a recommended debt relief measure by the National Credit Regulator (NCR).

Olivier advises debtors to be proactive in communication with creditors, particularly when facing changing circumstances. Should the need for debt counselling emerge, one has the right to request grounds for any rejection of their application and to receive comprehensive disclosures on both the process and associated fees. Consistent monthly statements from one's debt counsellor or Payment Distribution Agency are also a part of the rights to which consumers are entitled.