With the country under 21-day Coronavirus lockdown, business has ground to a halt and livelihoods are under threat. Alongside that is the ability to service debt.
This week, some banks announced measures to assist their customers. But those steps applied to customers in good standing, not those in financial distress.
Debt counsellors are concerned about the financially distressed and consumers under debt review, saying credit providers must give them some breathing room, rather than pursuing those who fall behind on payments with pre-Covid alacrity.
Benay Sager, DebtBusters’ chief operating officer, says many consumers were already vulnerable in terms of their debt and repayment schedules before the pandemic: This inability to service debt is likely to be compounded once the knock-on spreads to other sectors of society.
He warns against skipping monthly repayments without informing lenders, and that if consumers are struggling to make these repayments, they must seek help so that existing channels can be explored.
Sager, who chairs the National Debt Counselling Association, says they’ve approached the National Credit Regulator (NCR) and major credit providers, including the Banking Association of South Africa (Basa), retailers and micro lenders about payment “pauses” and/or extensions for some of their clients.
They also hope to extend the 17.3 cover period, which is a change in circumstances notice, from three to six months. When there is a temporary loss of income, such as when someone goes on maternity leave, the debt counsellor, or DC, is required to send a 17.3 notice to creditors informing them of the client's changed financial circumstances or employment status, allowing them to place a temporary pause on repayments and prevent the creditor from aggressively pursuing payments.
On Monday, Trade and Industry Minister Ebrahim Patel gazetted a Covid-19 block exemption for the banking sector after consulting with the Competition Commission. The exemption allows banks to work together to lessen the impact of the national disaster on businesses and private clients as well as placing
limitations set on asset repossessions
.
Some banks have already announced payment breaks for debtors in good standing - but there are strings attached.
Standard Bank is offering three-month payment relief for small business customers involving capitalising the interest and fees, and has given students a payment holiday at 0% interest and with fees. Spokesman Ross Linstom says customers in financial distress should contact the bank as soon as possible. “The sooner the bank is informed, the sooner both parties can find a workable solution to address or resolve issues of financial distress. It is not in Standard Bank’s interest to see a business fail, or a home lost. It is in both parties’ interest to find a workable solution. We do urge customers to contact the bank should they experience difficulties.”
Nedbank is deferring loan payments, extending existing loan periods or extending additional credit to manage short term “cash flow shortfalls”.
And FNB, which stressed its commitment to helping consumers and businesses “on their financial journey”, said it would be making further announcements on specific interventions soon.
It’s not clear if debt review clients are included in the Covid-19 exemption but the Debt Counsellors Association of SA says those payment plans are approved by the courts or the National Consumer Tribunal so banks, the NCR and debt counsellors are unable to amend the plans, only the courts can.
“We are also not aware of any finalised agreements or practices regarding payment holidays, as to date we have only received a few credit provider’s internal arrangements which differ from entity to entity.”
For now, debt advisor at Debt Safe, Carla Oberholzer says consumers must still honour their financial obligations - especially those under debt review.
“Now is not the time to think that creditors and banks will give all consumers a payment holiday just because the country is in lockdown. Consumers have to make sure that they do not make assumptions about payment holidays where there are none. Consumers have to continue to stay up to date with communications and contact their debt counsellors, banks or creditors to avoid any confusion or questions that they might have.”
Oberholzer says customers must not bank on a payment holiday and if they have questions, they need to contact their credit providers or debt counsellors directly.
She’s encouraging consumers to stay calm and work with what they have.
“It’s indeed tough and strange times for us as South Africans, but we have to stand in unity, communicate thoroughly and get through this together.”
The NCR was contacted for comment. It promised to respond numerous times but failed to do so.
BUSINESS REPORT/IOL