Curbing Debt: Protecting Yourself from Banks

Consumers seeking loans should ensure the lender is a different credit provider to the one they bank with, Summit CEO Clark Gardner said in reaction to court action being taken against Standard Bank.

Jacqueline Peters, manager of investigations and enforcement at the NCR told Fin24, “The National Credit Regulator (NCR) had received complaints from customers, in relation to instances where the bank had taken monies, which had been deposited into their accounts to settle arrears on Standard Bank debts.”

“Consumers in these instances are left with no monies for their ordinary day to day living expenses or other debt obligations, ultimately leaving already over indebted consumers in a far worse situation,” said Peters.

However, Gardener said that “In the case of setting off outstanding and arrears debts against savings on needs to look at how the set-off took place.”

He further adds, “Where the right authority was provided by the consumer to the credit provider then little relief can be provided. However, in many instances we have seen it would seem the set-off is done in a manner in breach of Section 90(2) (m) in that it gives priority to payments for the credit provider over any other credit provider.

“All credit providers should have equal opportunity to receive payments and therefore are required to make use of the standard or preferential debit order payments processes.”

There is of course the debit order mechanism, which is fairer. This allows customers the process to set off payments in that they authorise an amount and credit provider to be paid on a set date. This should mean that the consumer is aware of the payment and can budget for it accordingly.

Gardner said the NCA and the evolution of the credit industry is planning to move away from leaving the consumer in desperate situations and instead ensure they are protected from unfair credit provider behaviour or from their own desperate behaviour.

“We strongly encourage this shift, which may mean unsecured credit is less accessible in the short term as only financially healthy and able consumers access such funding,” he said.

“The problem in allowing set-off, and I am not aware of the details in this case, is that the amount and date of payment can come as a complete surprise to the consumer who then can find them in the most desperate of situations financially,” said Gardner.

Consumers should try to get a lender which is a different credit provider to the one you bank with, to ensure that payments can only be collected via authorized debt orders, which have an effective dispute process where necessary.

Most importantly if you cannot afford all your debt repayments, you should take effective action instead of hiding from lenders and accessing additional credit.

Gardner said, “Effective action varies from negotiating with your lenders, reporting reckless lending to the National Credit Regulator to approaching a reputable debt counsellor.”