Banks Constraining Economy

(The information in this article is courtesy of Fin24 - Banks "Throttling the Economy" - 19 May 2009)

Large commercial banks are constraining the economy while the housing market threatens to collapse and millions of consumers are in debt. Among those agreeing with this statement is Reserve Bank Governor, Tito Mboweni, who is also accusing the banks of holding on to credit and aggressively pursuing the indebted.

The debt counsellors Consumer Assist said that property sales are down by 30%, mainly due to the banks not issuing loans.

According to debt counsellors, creditors were going after lenders aggressively, especially where vehicles and mortgages were involved.

New statistics also showed that 46% of tenants couldn’t pay their full rental each month, according to Consumer Assist.

CEO of Consumer Assist, Andre Snyman, said that many indebted consumers don’t realise that by selling their houses and cars don’t let them off the hook. He advised that such individuals should immediately go under debt counselling so the terms of the loan can be structured and they don’t have to lose the car or the house.

He stressed that it is critical for heavily indebted consumers to get help before legal actions is taken against them, as they are constrained in how much they can assist once legal action has begun.

Snyman stated that they are currently helping 66 759 people and the figure was growing by 7000 per month. They expect the number of people receiving debt counselling will grow by 300% this year.

Snyman is convinced that debt counselling is making a difference even though banks and creditors are trying to resist it.

"Once an individual is under debt counselling, no one can touch his or her assets for the first 60 days while the debts are being renegotiated," Snyman explained.

After that, Snyman explained, creditors cannot remove assets as long as the person keeps paying back, according to the restructured loan or credit agreement.

Snyman would like to see government and businesses developing systems to better help those trying to get out of debt, as consumers are still confused as about how to use debt counselling.