Loans Debt set-off: How to curb banks taking your cash

 Loans Debt set-off: How to curb banks taking your cash

Cape Town – 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.

The bank told Fin24 this week that it will oppose a bid by the National Credit Regulator (NCR), which wants a court to order that the common law set-off has been superseded by section 124 of the National Credit Act (NCA).

“The NCR had received complaints from consumers, in relation to instances where the bank had taken monies, which had been deposited into their accounts held with Standard Bank and used these amounts to settle arrears on Standard Bank debts,” Jacqueline Peters, manager of investigations and enforcement at the NCR, told Fin24 on Tuesday.

READ: Credit battle begins: NCR takes bank to court over common law set-off

“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.

NCA does not provide sufficient clarity – Gardner

Gardner said the NCR’s case against Standard Bank was yet another example of the NCA not providing sufficient clarity to all parties involved.

“In the case of setting off outstanding and arrear debts against savings one needs to look at how the set-off took place.

“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.”

Debit order mechanism is fairer – Gardner

Summit believes the debit order mechanism is a fairer process to set off payments in that the consumer authorises an amount and credit provider to be paid on a specified date.

“This should mean that the consumer is aware of the payment and can budget for it accordingly,” he said.

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.

Advice to consumers

“Our advice to consumers to prevent set-off is to ensure that your lender is a different credit provider to the one you bank with,” he said. “This ensures that payments can only be collected via authorised debit orders, which have an effective dispute process where necessary.”

Further, if a consumer cannot afford all their debt repayments they should take effective action instead of hiding from their lenders or accessing additional credit, Gardner cautioned.

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

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Repairing a bad credit score…….

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When talking about a bad credit score this refers to your credit history and to repair this damage is a draining task, a person should manage their finances properly making sure that they have a budget that is prioritized so that you don’t default on your payments

How do I repair a bad credit?

To repair a bad credit score is a lot of work, it requires discipline and good budgeting

Tip 1

Pay-down balances: In order to improve your credit score you need to pay down your balances, this may seem to be ineffective when you already have a bad credit score but it actually helps to make up the damage that has been done to your credit score.  Even when you pay off all your balances you may find out that you have a high utilization ratio than expected. This may be due to previous default, paying regularly will improve your utilization ratio and credit time but not damage is not done instantly and the repairing process isn’t instant as well it will take time and payment without defaults.

Tip 2

Eliminate nuisance balances: This is a good way to better manage your credit, nuisance balances are balances that are easily avoided. An example is if you have two credit cards, why not cancel the other and have only one credit card making it easy for you to pay balances on the single card then paying balances on two credit cards. Paying well on this one credit card can help you improve your credit score then defaulting on one card and paying well on the other, this is meaningless because your credit score is being brought down by the card that has defaults.

Tip 3

Don’t remove (good) old debt on your report: Some people have a firm belief that if they old debts are reflected on their credit report, this has a bad notation on their credit score. This is indeed incorrect it is actually the opposite, old debts that have been paid off are historical proof that you can pay of your debts. They make your report more appealing, so when looking for credit this doesn’t count against you but rather it works for you.

To improve your credit score try to leave the good old debts as long as possible on the credit report so that the report is more appealing and magnificent to the eye that catches it.

Tip 4

Always pay bills on time: Paying your bills on time is important for improving your credit score what may seem like a small thing, may just turn out to be a big issue later on. A default is a default no matter how small, many small defaults constantly occurring make up for continues defaults and when combined they can be very damaging to your credit score. Credit score are determined by what is represented on your credit report, so if all those small defaults are represented on your credit report your credit score will be affected. A good credit score is determined by month to month on time payments

Tip 5

Stay away from risk: The biggest risk to your credit score is hinting at risk, this means that you trend on the line of being seen as a risk by creditors. This is identified by sudden change of behaviour like suddenly missing payments or paying less on monthly payment. This makes you appear as unreliable, other red flags would be to take out cash advances or use cards at business that at a later stage can been seen a money stress factors.

Tip 6

Obsession is bad: when looking to get credit you should be less focused on your credit score and more focused on making your payment on-time and to the correct amounts, the credit score will be a reflection of your payment habits and your credit score will improve.

A credit score is taken from your credit history good payment constantly over a period of time improves your credit score. To repair a damaged credit score is simply to be discipline with your payments, paying on time and the correct amounts. Being patient and knowing that it will take time to repair the damage is also being part of it.

If you feel that the debt is too much to pay by yourself and you need help don’t take out a loan to repay the debt but rather consider debt review. Taking a debt to close of another debt is still a debt and you will still have to pay back that debt so it holds no improvement of your financial situation.

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Why do you get blacklisted?

Not paying accounts on time or not paying them at all. Make sure that you always pay your debt on time or before due date.

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Debt Relief

Given the popularity of online transfer payments and credit card purchases, debt accumulation has become a huge problem. Many individuals make purchases without a detailed financial plan. This can lead to a high debt figure that you may be unable to pay.

In order to have manageable debts it is important to get a debt assessment on a regular basis. The debt review process enables you to re-structure your debt repayments. FinanceWeb can provide debt counselling services.

If you are apprehensive about your debts, we present some of the benefits of debt review to encourage you to contact us to find out how we can assist you.

  1. Restructuring of debt

As the debt accumulates there can be a negative listing given to your expenses. A debt review enables you to make a schedule for the debt payment. The debt counsellor can help you in developing a budget based on your financial needs. The budget is decided after the utility expenses have been taken into account. This helps in allocating a part of your income to pay the debt on a monthly basis. Debt review enables you to set realistic goals for payments as per your future earnings.

  1. Discuss payments with creditors

Debt review helps in negotiating repayments with your creditors. A debt counsellor can help you in getting payment terms that you can easily pay. In the absence of debt counselling, creditors may charge you a higher amount so that they can get a larger payment on your debt.

  1. Prevent legal action

If payments have not been made to creditors at the assigned date then you may face negative consequences. A debt review can be used to prevent these creditors from taking a legal action against you. During this time period, debt counsellors can restructure your debt repayments so that you are able to pay cash to creditors.

  1. Straightforward payments

Debt reviewing process can assist you in simplifying payments to creditors. Under debt review you may make separate payments to creditors as instalments. Debt review is a rehabilitation process and you will be issued with a credit clearance certificate when all of your debt is paid up.

Debt counsellors can help you with re-structuring your debts and helps you to pay a reduced instalment every month to your credit providers. This will ensure that you will have enough money at the end of the month for your daily living expenses.

FinanceWeb offers free, no obligation Debt Review assessments. Let us deal with your creditors. Visit https://www.financeweb.co.za/debt-management/ for details.

Personal Loans

Personal Loans

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Qualifying criteria

Need to be permanently employed for more than 3 months

Earn a basic salary of R 3000 +

Be 18 years or older

Have your own bank account (let us know if you dont have your own bank account as we have other options)

 

Details

Interest rates vary from 14% – 33% dependent on your credit rating.

Once we get your application we do a pre-approval this determines amount, interest, period and installment you qualify for. We will then forward you the quote and you decide from there to take up our offer or not. Once an offer is received the application is 90% through.

We can also consolidate some personal loans or accounts to make you more affordable.

What is a personal loan?

Personal loan is a loan for personal, medical, family, education, vacation or household (extension, repairs, purchase of air conditioner, computer, refrigerator, etc.) use, as opposed to business or commercial use. Unsecured loans are advanced on the basis of the borrower’s credit-history and ability to repay the loan from personal income. Repayment is usually through fixed amount installments over a fixed term.

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