Know your credit rights right before you need to use them

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SIMON BROWN: I’m chatting with René Moonsamy, chairperson of the National Debt Counselling Association. René, appreciate the time. If we look at investing, credit lending, there’s a fair amount of regulation and laws to protect South Africans. Perhaps the standout is the National Credit Act, the NCA, one of the most, you said, progressive pieces of credit legislation in the world.

I remember when it was being formulated, and I remember the impact it had. To be clear, it was a positive impact. It’s an important act.

RENÉ MOONSAMY: Yes, Simon, and thank you so much for having me. I agree, it is one of the most progressive credit frameworks globally. It requires great, clear disclosures. It requires fair treatment and great guidelines for proper affordability assessments.

The challenge itself is never the law, is it? It’s always the consistent application, and on the back end consumer awareness.

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SIMON BROWN: It is perhaps that consumer awareness, because it is a case of, as you say, protecting both parties here, both the lender and the person who is taking the loan. If you’re the one taking the loan, you do have rights. You just perhaps need to know about those rights as well.

RENÉ MOONSAMY: Absolutely. And I think the greatest misconception comes in when consumers assume that rights kick in when you get an agreement.

But if we’re talking about the National Credit Act, it’s great for consumers in general to know that rights start before you even access credit, and in the process of accessing credit.

If they knew that, I think consumers would feel empowered to gain access to healthy finance, good finance that is necessary. Debt can be very good, serve great purposes, and if we know more, we can do better.

SIMON BROWN: I take your point because one of the points is the affordability process. The other is that if credit is declined you’re allowed to ask why it was refused – and get an answer. I think a lot of folks are unaware of both those things, and they are hugely important because, to your point, debt is not always bad. In fact, debt can be hugely useful.

RENÉ MOONSAMY: Absolutely. I’d like to expand on the point you raised about what we would call “reckless lending”. That’s when the credit agreement is granted but a proper assessment was not concluded, or it was concluded and the creditor still lends the finance to the consumer, knowing that it was not going to be able to be repaid.

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A great point to raise from that, Simon, is not just the point of reckless lending, but also reckless borrowing. It’s twofold. It is of course behaviour. It’s also disclosure. But it’s also speaking to the issue we’re having now, where consumers just can’t afford monthly living and credit is necessary to get to. This is where rights and regulation come in – to build a framework that is sustainable both for the credit market and for the consumer.

SIMON BROWN: I like that sustainable point, and I like the point around reckless borrowing. It’s disclosure. For someone who’s looking to borrow money, potentially filling in forms, disclosure is hugely important. To be short, being honest really matters in this environment.

RENÉ MOONSAMY: Absolutely – and when the incentive is there not to be forthcoming about your affordability. No one is going out looking for credit because they’re in a good financial position, unless you’re going after something like a bond or vehicle finance. Everyone is hoping to have this acceptance, this credit being granted to them.

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There is an inherent incentive not to disclose fully all your expenses or, on the other hand, not having a good enough consideration or understanding of your own affordability and expenses, both being equally dangerous for the average consumer.

SIMON BROWN: I like your point. If you’re applying for credit there’s incentive. Either you need it for day-to-day expenses or maybe it’s a shiny car or an education. There is an incentive there.

There’s also an important point. If it gets to default – and we never want that, no parties are hoping that happens – but if it does get to default it doesn’t mean that it’s a bad person. It doesn’t even mean it was a bad loan. Importantly, you still have rights. That is critically important.

RENÉ MOONSAMY: Absolutely. I think the National Credit Act here is protecting first the case where you get to over-indebtedness and then providing mechanisms for that over indebtedness; and laws to protect you in default are stand out. Understanding what your rights are if you default, if you fall into arrears, and what is available to you to remedy those things, is really important.

Creditors are responsible for informing consumers what their options are – whether it is to settle the arrears, to bring the account back up to date, renegotiate, and even refer to a debt counsellor. It would be great if consumers knew that.

Here again, consumer education is so important. It empowers us to make better decisions.

It would be great if we knew that, as the general consumer, before we get into a position where it has become necessary to know.

SIMON BROWN: Yes, I take your point on that. Know the rights before you need to use the rights.

We’ve been talking about the National Credit Act. Another thing which is hugely important is the Consumer Protection Act, which is really around being honest and fair, responsible marketing and protection from unfair contracts. This one to me perhaps is a little more skewed towards the consumer, but another important act for people. When I say a “little more skewed”, I mean in a good sense

RENÉ MOONSAMY: Absolutely. The CPA best protects us from unfair business practices, good service supplies – all of it falls in there. But for me, the standout that is highlighted by a CPA, or the lack thereof even, is “Buy Now, Pay Later”, which has overtaken the credit marketplace right now and is a great example of how a great framework can remain great only if we continue to evolve legislation and the legal framework around credit.

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Buy-now-pay later doesn’t necessarily fall within the Consumer Protection Act or the National Credit Act and is in this little grey space right now and a good example of what can go left when consumers are not afforded formal legal protection in the credit space.

SIMON BROWN: That’s a great point and the Buy Now, Pay Later will sort of be brought into the fold. But well, it’s making hay until then.

We’ll leave it there. René Moonsamy, chairperson of the National Debt Counselling Association, I appreciate the time.

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