Be Financially Smart: Gauteng Warns Against Unregistered Credit Providers

Tips for safe borrowing and understanding your rights to avoid financial pitfalls this year.

With the start of the year placing financial strain on many households, the Gauteng Department of Economic Development has urged consumers to exercise caution when borrowing money and ensure their rights are not violated by credit providers.

As financial pressures mount from expenses such as school fees, uniforms, transport, and rent, many consumers may find themselves considering credit to meet these obligations. However, the department warns against turning to unregistered credit providers, often referred to as “Abomashonisa,” who engage in unfair practices such as overcharging interest or confiscating personal items like ID documents and SASSA cards to enforce payment.

Avoid Falling into the Trap of Unregistered Credit Providers

“This is an unfair business practice,” said Milly Viljoen, Director for Education, Awareness, and Stakeholder Relations at the Gauteng Department of Economic Development. “Sometimes, when credit applications are declined by registered providers, consumers resort to borrowing from Abomashonisa. However, this approach often worsens the consumer’s financial situation due to the exorbitant interest rates charged.”

Viljoen emphasized that a rejected credit application signals a deeper financial issue. Instead of turning to unregistered lenders, consumers should consider negotiating lower instalments with their current credit providers, or paying off and closing some accounts to improve their financial standing.

Know Your Rights as a Consumer

Under the Consumer Protection Act (CPA), consumers are entitled to clear and understandable information. Viljoen advised consumers to take the time to read and understand the terms and conditions of any credit agreement, especially the details of Credit Life Insurance. This insurance can offer a safety net by covering debt in cases of job loss, disability, or other income disruptions.

Tips for Safe Borrowing

To help consumers make informed decisions, the department shared the following advice:

1. Borrow only when necessary: Avoid using credit for non-essential items such as groceries.
2. Verify credit providers: Confirm the legitimacy of any credit provider, including those advertising on social media, by contacting the National Credit Regulator (NCR).
3. Understand the full cost of credit: Be aware of all charges, including interest rates, initiation fees, service fees, and Credit Life Insurance. Review the pre-agreement statement and quotation, which must outline all associated costs.
4. Take your time: A pre-agreement or quotation has a five-day cooling-off period. Sign only when you fully understand the terms.
5. Never sign a blank agreement: Always read and clarify the document before signing.
6. Monitor your credit report: You are entitled to one free credit report annually. Regular checks can help you dispute any inaccuracies.
7. Beware of upfront fees: Legitimate credit providers do not charge fees before granting credit.

Additional Resources for Consumers

The Gauteng Office of Consumer Affairs collaborates with multiple stakeholders to protect consumer rights. If you suspect a credit provider is unregistered or violating your rights, you can report them to the National Credit Regulator by calling 0860 627 627 or emailing complaints@ncr.org.za.

By being vigilant and informed, consumers can avoid financial pitfalls and ensure their borrowing decisions support long-term financial health.