“Apply for a R50 000 Personal Loan today and have the cash in your account tomorrow!”

“Quick Payday Loans from R2 000!” “Own this luxury German vehicle from as little as R5 999 per month.” “Qualify for our Platinum Credit Card and pay zero interest on purchases for the first 30-days.”

Why are we being bombarded with credit advertising? And when did all of this start?

It’s because a range of political, social and economic changes have influenced the consumer credit market in South Africa since the late 60s. If you are one of the 23-million South Africans who are credit active, you might be interested in finding out how and why credit suddenly became so easy to get your hands on in the last 10-years.

To answer this question, we need to pop into a time capsule and, like Marty McFly did in that cool 80s flick ‘Back to the Future’, head back 5 decades.
It’s the 60s and South Africa is a very different place.

The Government at that time introduces the Usury Act which is legislation that deals with credit. It’s followed up by the Credit Agreements Act in 1980 and the Exemption Notices of 1992 and 1999.

Why is this important?

Because as we walked away from our horrible past and entered into a new democracy, we needed new legislation that would afford every South African (regardless of race, income, and gender) the opportunity to apply for credit.

In a nutshell, all the old credit legislation was deemed to be outdated, fragmented and most importantly non-inclusive.

A new South Africa needed new credit legislation.

So, the Department of Trade and industry got the nod to set up a technical committee to undertake a credit law review in 2004. The Credit Law Committee took stock of the existing consumer credit legislation in South Africa and also researched consumer credit in Europe and other parts of the world.

Their verdict was that 3 pieces of current legislation needed to be replaced by a new Act and that a statutory regulator becomes the watchdog.

And out of this all we have The National Credit Act and the National Credit Regulator which kicked into gear in 2007.

The National Credit Act has several purposes, but what is key is that, at its core, the Act looks to promote a fair and non-discriminatory marketplace for access to consumer credit.

This is important. The Act makes it clear that every South African can apply for credit.

Now before we move on, can I ask you to look for your phone.
It’s probably at arm’s length, right?

Take a second to consider how technology has changed in the last 20-years. The device you call your “phone” is nothing more than a high-end portable computer, keeping you permanently plugged into a world full of news, social activity, and retail experiences.

You can have everything your heart desires and you can have it all now. Well, that’s if you have the money. If you don’t, then you can always apply for a loan with a click of a button.

The internet has changed everything and why this is relevant is because it’s helped smart marketers, selling credit products, target all South Africans who are all fair game.

Legislation and Technology. Those are 2 of the reasons why the credit landscape has changed in South Africa.

The third reason why the credit landscape has changed so much is purely down to economic factors. Things haven’t been great in South Africa for a while now. Confidence is down, we’ve had a tough time politically and the economy, well the economy just isn’t growing as fast as we would like.

Millions of South Africans are struggling financially. In fact, millions of South Africans have been struggling for a while now.

What do you do if you need things and you don’t have the money? You borrow money.

Now couple all of this together.

We have new legislation that came out 12-years ago and it says it’s your democratic right to apply for credit. Millions of desperate South Africans, looking to get their hands on cash and things they need, start borrowing up a storm. Smart marketers understand they can almost get to anyone, anytime via our phones and the internet.

Now we have an estimated 12 million South Africans who are considered over-indebted and are literally one month away from financial ruin.

President Cyril Ramphosa just signed in the new Debt Relief Bill. To give you some context here, the legislation is looking to offer people who earn less than R7 500 and have less than R50 000 in loans some urgent relief (potentially wipe clear all their debt).

Think about earning R7 500 per month and being saddled with R50 000 debt.
It’s just about impossible to see how you could get yourself out of that situation without some intervention.

South Africans are waking up to a serious debt hangover. It’s been a decade long ‘free for all’ (well ‘apply for all’) and now the chickens are coming home to roost.

The perfect storm…new legislation, advanced technology, which makes it easy to market to people, and millions of people who need to borrow.

If you feel like the walls are closing in on you, perhaps you are a candidate for Debt Review.

The SA Debt Advisors Team