With consumers showing growing confidence about their financial future, access to credit is still considered essential for achieving financial goals.

However, the growing demand for new credit - with personal loans, credit cards, and “buy now, pay later” services among the most sought-after options - is also resulting in some consumers facing hardship because of credit, says Howard Gabriels, Credit Lead Ombud at the National Financial Ombud Scheme (NFO).

He said as the New Year unfolds, many South Africans find themselves grappling with financial distress and uncertainty about their financial rights, exacerbated by over-indebtedness and the complexities of credit agreements.

Fortunately, for those who must contend with credit woes, the NFO is ready to help consumers with their challenges, ensuring financial fairness, transparency and justice in credit-related matters. The NFO offers free alternate dispute resolution, thus protecting and empowering credit-active consumers.

“With the Government of National Unity bringing hope and optimism; the easing of inflation; and an interest rate cut; consumers are gaining greater financial stability. Thus many consumers access credit for individual and family economic stability.

“According to TransUnion which explores financial trends in South Africa, the country’s credit market stood at an outstanding balance of R2.37 trillion in the second quarter of 2024,” said Gabriels.

The Credit Division of the NFO has jurisdiction on non-bank credit disputes, covering credit agreements such as store and furniture accounts, microloans, non-bank credit cards, non-bank vehicle finance, non-bank home loans and other forms of credit not issued by banks.

“Credit consumers can rest assured their complaints are in capable hands with our dedicated and qualified Adjudication Team that has the expertise to resolve non-bank credit disputes such as reckless lending and issues relating to over-indebtedness and inaccurate credit reporting.

“Many South Africans are still unaware of the importance of regularly reviewing their credit reports. An estimated 87% of South African who take credit have errors on their credit reports which can adversely affect a consumer’s creditworthiness,” Gabriels said.

Identity theft has also become a significant threat to South African consumers with the Southern African Fraud Prevention Services reporting a 356% increase from April 2022 to April 2023, and a 400% increase in 2024, thus  highlighting the need for greater vigilance.

Gabriels said by checking your credit report, you can identify inaccuracies, detect potential fraud, and take proactive steps to not only prevent fraudulent financial losses but also improve your credit standing. Errors on credit reports could negatively affect credit active consumers’ financial opportunities.

“Identity theft surged by 337% in 2023 which often manifests on credit reports. The micro finance sector, the clothing retail sector and the banking sector customers are targeted.

“Your credit report is not just a summary of your financial activities. It is a tool that empowers you to protect your financial future. All South Africans are entitled to one free credit report per year from each registered credit bureau. The NPO will act to ensure that errors on credit reports are investigated and corrected.

“Creditors who lend irresponsibly and recklessly to consumers who cannot afford repayments, will also be held accountable. Credit providers have a duty to assess your affordability before granting credit. In some instances, we can recommend for the debt to be written off. Each complaint is assessed and resolved on its own merits.

“January is a time of reflection and resolution for many; we encourage all South Africans to take this opportunity to review their credit reports, understand their rights, and reach out to us if they believe they have been treated unfairly in the credit space,” he said.