Six-million South Africans have bad credit records and at least 300 000 have no way of getting out of the debt holes they have found themselves in, according to the National Credit Regulator.

South Africa has one of the world’s lowest domestic savings ratio and one of the highest rates of bad debt.

Since June 2006 there have been 10 interest rate hikes to try and get consumers to curb spending, but many consumers are in an inflationary cycle where they are borrowing to try and pay off debt according to Liza van Wyk, CEO of management training organisation BizTech.

“The National Credit Act was sorely needed when it was put into place in June last year and it has gone a long way to limiting excessive borrowing and lending, but consumers and many businesses are still in trouble.”

As examples she noted:

· The Credit Bureau Association says credit bureaus are reporting an increase in defaults and judgments, especially within low and middle-income brackets.

· Banks are reporting high numbers of defaults and increased requests for review of credit agreements.

· Auctioneers are reporting up to 5 000 vehicles being repossessed each month.

· Up to 2 000 homeowners losing their homes every month because they can no longer afford to meet bond repayments – bond instalments now cost 35% more than they did two years ago.

· Furniture retailers say the number of consumers defaulting on their instalments has risen considerably over the past few months. Furniture Retailers Association executive director Dick Behrens said the new credit act made it difficult for the furniture sector to repossess goods and many creditors would rather work with debtors to find solutions rather than go the expensive route of litigating.

· The Bureau of Market Research at the University of South Africa says South African households owe R1.1 trillion, while household income is R1.4 trillion, this means the annual ratio between debt and income is currently at 82 percent, compared with 77.6 percent last year.

· National Credit Regulator, Gabriel Davel says there “are about 300 000 people or more that we would define as extremely over-indebted, to the extent that they probably can’t solve their financial problems themselves. And there are probably another 700 000 people or more that we would define as debt-stressed.”

Van Wyk says, “The National Credit Act is a fine piece of legislation and it has mechanisms to help consumers and businesses manage debt better, but too few understand the legislation appropriately.”

BizTech has a new course on the National Credit Act which they are finding is extremely popular especially as an in-house course.

“Companies have realised that this is very sharply honed legislation that can work against them if they do not understand it, but if they do and apply it correctly it makes running a business significantly easier with lower risks.”

BizTech also has a Personal Finance course designed after companies approached them to assist staff who were over-spending and getting into debt.

“A simple mechanism the new Credit Act has is a provision that consumers can inspect any credit bureau or national credit register file for information concerning them without charge once within any period of 12 months".

"This enables consumers to know if their credit record is accurate and challenge inaccuracies, including being compensated if incorrect information has been reported by them. It also gives them a way of realising how important it is to keep payments up to date".

“This is very detailed legislation and many businesses are still battling to get their staff to understand it. Our course, The National Credit Act, simplifies the legislation and creates tasks and workshops to make learning it fun and memorable".

"In these high stress days it is important for businesses to keep up to date with the knowledge that can help them manage their businesses better,” Van Wyk said.