At the moment, the industry is facing many different challenges. Some are nuanced and seem small, but have a big knock on effect and others are so big no one knows what to do about it.
The Economy in General
There is a massive need for debt stressed consumers to get help. Millions of people across the country are skipping debt repayments every month.
High interest rates and high levels of indebtedness mean consumers are not going to the shops and spending money. Businesses are starting to worry if they will make ends meet each month, the money is just not moving.
Credit providers are struggling to find consumers to lend more money to, as most people cant realistically afford more debt. Young people are not getting jobs, and as a result can’t be given credit. Credit Providers need to recover their existing credit from non-paying clients and want more credit active clients.
In the debt review space, there are some key issues as well.
For example, at present there are around 1.3 million people who have signed up for debt review but have not finished it. Of those, it seems only 245 000 are actively getting help from a Debt Counsellor, and paying off their debts via a PDA each month. So… how do you help the 1.1 million people to get back into regularly paying their debts?
Consumers who sign up and then quickly change their mind find they are “trapped” with a debt review flag at credit bureaus, and get cut off from their usual credit cards etc.
People “trapped” in debt review limbo for a number of years due to falling off the program, are being scammed by people offering ‘get out of debt review’ services or some sort of debt mediation scam. Many are losing thousands of rand to such scammers.
Debt review consumers stay out of the credit market for 5 years in general. Yes, they are paying off their debts but credit providers would like to see them back in the normal credit market sooner, if possible.
Consumers who enter debt review often have to wait years to pay off even a small debt. This is due to the way payments are spilt up. No quick and easy wins, just a long grind for 5 years.
People in debt review currently can’t get a cheaper car or cheaper house which they might actually be able to afford due to concerns over offering debt review clients new credit, and that being called ‘reckless’.
PDAs who supply services to consumers and Debt Counsellors alike have not had realistic fees for several years. In retrospect, past changes were overly harsh and cut their revenue to unsustainable levels for the services they offer. If this is not addressed soon, it will impact the 245 000 people trying to pay off their debt.
The list goes on and on, and once everyone has had their input, the Task Team will have its work cut out for it. What to prioritise, what to focus on, which items have simple solutions and which are more complex and may take time?
The idea currently seems to be that the Task Team will suggest the fast and easy wins, and other items may go on to be discussed in more detail over time at CIF.