Are you in debt with money lenders or mashonistas?
People in need often borrow money from money lenders in townships, also called mashonistas. They are not registered with the National Credit Regulator n South Africa and operate illegally.
They easily lend money to people who are not creditworthy enough to borrow money from banks. They usually take the person’s ID and bankcards as collateral, to have a hold on the person. Mashonistas charge interest rates are so high that the person is never able to pay it off.
For example, a person will borrow R 3000 to pay off other debt and end off paying the mashonistas R 60 000. If you don’t keep on paying them, they threaten you and your family with violence. They often have the local police in their pockets which renders the person helpless against them.
Best advice: Never ever borrow money from an illegal money lender.
Loan sharks are a law unto themselves and deserve their bad reputation. These informal lenders will not only take your property that they demand you put up as collateral and forfeit if you don’t pay up, but in the worst-case scenario, they may take your life.
How to get out of the claws of an illegal money lender /mashonista?
The first thing to know is that it is against the law for someone to lend you money if they are not registered with the National Credit Regulator (NCR).
You can lodge a complaint by completing Form 29. This is available on the website ncr.org.za. You can also get one by emailing [email protected] or by calling 011 554 2700. the NCR investigates claims of illegal money lenders and conducts raids in partnership with the SA Police Service and makes arrests. In the form, you will need to include your details as well as information relating to the loan shark. The NCR aims to provide feedback on written inquiries within 10 working days.
Fast facts on debt in South Africa
- According to the World Bank, South Africans are the biggest borrowers globally, with 86% of the debt population.
- Ten million of those are behind on their payments.
- 7.8 million of the country’s 60 million residents have taken out a combined R 225 billion of loans without collateral, primarily for short-term needs such as furniture and urgent family care.
- 2/3 of customers pay more than 25% of their net income to service their loans.
- Many find themselves in debt because they lack financial education. They are lured by banks, cell phone companies, and furniture and clothing stores into making loans, acquiring credit cards with increasing overdraft facilities, and buying things they can’t afford.
- Many people are lured into pyramid schemes to increase their money fast, and they always lose all of their investments.
- ‘’Black tax’’ is part of the problem, as young black graduates are expected to pay monthly to help support their families instead of just taking care of themselves.
- Salaries in South Africa do not keep up with inflation. People have less to live on year by year. The extreme indebtedness of miners was seen as one of the root causes of violent labour unrest that culminated in 34 strikers at Marikana.
- Two-thirds of the mining industry’s 450 000 workers have had unsecured loans and spend an average of 48 % of their wages paying off debt,
- Unemployment has reached an all-time high, with 29% of South African citizens out of work.
How do people react to debt?
If you have any of these symptoms, please ask for help. There is help available from counsellors, debt counselling, and the National Credit Regulator.
New legislation aimed at helping those in debt
President Cyril Ramaphosa, in August 2019, signed the National Credit Amendment Act into law, setting the groundwork for over-indebted consumers to have payments suspended, in part or whole, for as long as 24 months, or even scrapped if their financial situation has been found to have worsened.
You will have to apply – and there’s a deadline.
Debts will not be written off automatically. You will have four years from when the bill takes effect to apply to the National Credit Regulator to have your debts written off. They will look at your income and the amount you owe. The law applies to customers who earn a gross monthly income of no more than R 7 500, and have unsecured debt amounting to R 50 000. They decide whether your situation is desperate enough.
After applying with the NCR, its “debt intervention officers” will consider your case and inform your creditors and credit bureaus that you have applied.
The NCR will go through your finances to determine if you are over-indebted and whether some of your creditors were “reckless” in extending debt to you. (This means that they shouldn’t have granted you a loan that you couldn’t afford at the time.) The NCR will take action against offending creditors. But even if you weren’t the victim of reckless lending, you will still be considered for debt relief.
The NCR will also provide you with some financial education.
Then, the NCR will determine whether you can pay off your debts within five years. If they find that you can settle your debts, your application will be rejected.
If it’s determined that you won’t be able to settle it without intervention, all or some of your debt repayments may be suspended for up to a year.
Eight months later, the NCR will take another look at your finances. If you can repay your debts within five years, the tribunal will consider rearranging your debts (lowering interest or extending loan periods). If you’re still not in a position to pay off your debts, you may get another twelve repayment-free months. If, after another eight months, the NCR finds that you still can’t pay off your debts, your debts may be written off – all of it or a part of it.
How long before a debt is written off in South Africa?
Prescribed debt refers to the debt that the creditor has not recognised or paid for more than 36 months. This is considered senior debt by creditors and may then be written off.
Please note: You cannot go to jail for not paying your debts when there is a judgment against you. You can, however, be liquidated, sequestrated, an emoluments attachment order placed on your salary or your assets attached
What happens after your debts are written off?
If your debt were written off, you wouldn’t be able to apply for credit for up to a year. Your credit record will also reflect that you had debt is written off, which might prevent you from getting credit in the future.
Do a quiz to learn more about the warnings signs of being in debt: Warnings signs of debt