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06 Feb 2014

Consumer Financial Vulnerability Getting More Severe

National Credit Regulator (NCR) No Comments

As embattled South Africans face high debt levels alongside ongoing economic and employment uncertainty, a recent report has revealed that consumers’ financial vulnerability is growing more acute.

The most recent consumer financial vulnerability index, for the third quarter of 2013, shows that consumers’ financial vulnerability slid below levels seen in the third quarters of 2012 and 2011.

The index dropped to 45.9 points, lower than the 47.9 points registered in the third quarter of 2012 and the 54.3 points in the same period in 2011.

The categories of lowest income earners, those earning up to R5 999 and between R6 000 and R11 000, were among the most vulnerable when it came to being able to service their debts.

The consumer debt burden has, however, become a major worry for the government and amendments to the National Credit Act are among a number of financial sector and other reforms aimed at reducing household over-indebtedness.

Advocate Kate Thambiran, Managing Director of LUCID Clear Credit advised, “the stressed cash flow of consumers will inevitably impact their repayment obligations. This will see their credit report status deteriorate. Missed payments will lower credit scores, but worse still, is when missed payment progress to blacklistings. Adverse listings severly hurt your credit score and turn your credit worthiness negative.”

“It is imperative for consumers to honor their monthly repayment obligations, to preserve their credit worthiness. Consumers should cut back on discretionary spending, like entertainment and luxuries, and maintain their repayment obligations so as to preserve their credit status,” says Adv Thambiran.

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