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IOL News
3 days ago
- Business
- IOL News
Rising debt: calls for greater consumer vigilance
The National Financial Ombud Scheme South Africa (NFO) is concerned about high levels of debt exposure in the wake of the release of TransUnion's Q1 2025 Industry Insights Report, which confirms a troubling trend: credit products commonly used by lower- and middle-income consumers are experiencing rapid growth in both uptake and default rates. Image: File With the dramatic shifting of credit from a tool for upward mobility to a survival mechanism for necessities like food, rent, electricity and transport, alarm bells are being sounded about unsustainable debt levels of consumers. The National Financial Ombud Scheme South Africa (NFO) is concerned about high levels of debt exposure in the wake of the release of TransUnion's Q1 2025 Industry Insights Report, which confirms a troubling trend: credit products commonly used by lower- and middle-income consumers are experiencing rapid growth in both uptake and default rates. With many households relying on credit just to meet basic needs, the NFO has warned of a surge in retail and non-bank loan defaults and urges consumers to beware of reckless lending, which can only place them deeper in debt. FINANCIAL STRAIN According to TransUnion, which explores financial trends in South Africa, non-bank personal loans now reflect the highest rate of serious delinquency in over three years, with 41.3% of account holders falling three months or more into arrears. This represents a sharp 520 basis point year-on-year increase and outpaces the default rate for bank personal loans by over 15%. The statistics for other retail credit products are equally concerning for the NFO. Default rates now stand at 27.1% for retail instalment accounts, 25.9% for clothing accounts, and 14.9% for retail revolving credit. The TransUnion report shows that while more consumers are taking up loans, retail instalment credit is up 16%, clothing credit 7.6%, and revolving credit 5.4%. The simultaneous rise in missed repayments signals growing financial strain on households. Kwanda Vabaza, Manager - Adjudication at the NFO's Banking and Credit Division, said: 'These figures are not just statistics. They reflect the reality of households using credit to survive rather than to grow. When nearly half of all non-bank loan holders are behind on their payments, the system is under serious strain. KNOW YOUR CREDIT RIGHTS 'Many consumers remain unaware of their rights under the National Credit Act (NCA), particularly when it comes to reckless lending.' The Banking and Credit Division of the NFO, led by Nerosha Maseti, 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. Vabaza said: 'We continue to see cases where credit was granted to consumers who clearly could not afford the repayments. This is classified as reckless lending and is prohibited by the NCA. In such instances, consumers are entitled to relief, which may include restructured terms or, in extreme cases, a recommendation by the NFO for the cancellation of the debt. 'The NFO also frequently receives complaints relating to clothing accounts, furniture and appliance credit, store cards, and non-bank personal loans. ''These disputes typically involve issues such as prescription (legally expired debt), incorrect balances, credit bureau listing disputes, fraud, and affordability assessments that were either not conducted or done improperly, leaving consumers burdened with unsustainable debt. 'Consumers have the right to receive credit only when it is affordable and in their best interests. They are also entitled to clear explanations of the total cost and legal consequences of any credit agreement they enter into.' Fortunately, for those who must contend with credit woes, they need not suffer in silence when things go wrong - 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. 'Where rights are violated, consumers should contact our office. Our services are free and impartial, and we aim to resolve disputes in a way that is fair to both the credit provider and the consumer,' said Vabaza. CREDIT APPLICATION TIPS The NFO encourages all consumers to keep the following tips in mind when using or applying for credit: Only borrow what you can afford to repay, and do not misrepresent your affordability prospects. Before accepting any credit, check your income and monthly expenses to make sure you can manage the repayments comfortably. Avoid using credit for day-to-day expenses: Relying on credit to buy food, fuel, or airtime can quickly lead to debt spirals. Credit should be used wisely, not for survival. Understand all the terms and costs: Ask for a Pre-Agreement Statement and Quotation, which contains a full breakdown of interest rates, monthly repayments, and total costs before signing a credit agreement. Know your rights under the National Credit Act (NCA): You are entitled to fair treatment, proper affordability checks, and clear communication from any credit provider. If these are not followed, you may have a valid complaint. Pay on time and keep track of your accounts: Set up reminders or debit orders to ensure you never miss a payment. Keep a record of all your credit agreements and statements to avoid surprises 'If you are struggling or believe your credit agreement may not have been fair, contact the NFO. We are here to help ensure accountability and to protect your rights as a credit consumer,' Vabaza concluded. The National Financial Ombud Scheme of South Africa
IOL News
24-06-2025
- Business
- IOL News
Major banks under scrutiny as NFO reports increased consumer complaints and significant recovery outcomes
One year after the NFO was established, it says thousands of consumers have been helped. Image: Supplied The National Financial Ombud Scheme (NFO) has released worrying statistics indicating that South Africa's largest banks are at the centre of a growing wave of consumer complaints, with over 5,900 cases registered in 2024 alone. This alarming trend underscores the pressing need for better banking practices and reinforces the role of the NFO as a crucial mediator between consumers and financial institutions. Established just a year ago, the NFO has already made significant strides in protecting consumer rights, successfully recovering approximately R328.5 million from various financial entities across the nation. This independent body acts as a watchdog for fair treatment, helping clients reclaim their funds when disputes with banks, insurers, and credit providers arise. The National Financial Ombud Scheme is investigates the operation of South African banking institutions Image: Supplied Breaking down the data, the NFO highlighted that the banking division alone opened a total of 15,412 cases, successfully closing 11,535 complaints, an achievement that reflects a sharper turnaround in response time compared to the previous year, according to Nerosha Maseti, lead ombud for the Banking Division. In terms of recovery, the breakdown shows considerable disparities among banks: Capitec Bank: 1,203 complaints (20% of banking cases), with 22% ruled in favour of consumers. 1,203 complaints (20% of banking cases), with 22% ruled in favour of consumers. First National Bank (FNB): 1,017 complaints (17%), with 16% consumer wins. 1,017 complaints (17%), with 16% consumer wins. Standard Bank: 998 complaints (17%), 19% ruled for consumers. 998 complaints (17%), 19% ruled for consumers. Nedbank: 881 complaints (15%), with 22% consumer wins. 881 complaints (15%), with 22% consumer wins. Absa: 812 complaints (14%), 13% ruled for consumers. The leading cause of these grievances remains fraud, accounting for 30% of all complaints. Following closely behind were issues related to maladministration and the struggles of debt-stressed consumers, signalling areas where banks must critically reassess their service delivery and client engagement strategies. Maseti emphasised that the NFO's commitment to fair outcomes has not wavered, despite significant internal changes. The organisation's efficient resolution processes aim to ensure that consumers feel empowered and supported in their financial dealings. As South African consumers grapple with an array of financial challenges, these findings urge a dialogue about the need for greater transparency and accountability in the banking sector, pivotal to restoring trust in South Africa's financial ecosystem. DAILY NEWS
The Citizen
21-06-2025
- Business
- The Citizen
Ombud gets R328 million back for disgruntled financial consumers
The National Financial Ombud Scheme handles complaints about banking, life and short-term insurance and credit. The National Financial Ombud Scheme managed to get a staggering R328,5 million back for disgruntled financial consumers in the first year of its existence after all four former financial ombud schemes were combined into a single, one-stop, dispute resolution service. According to its first annual report, the National Financial Ombud Scheme South Africa (NFO) handled an impressive 35 855 complaints through its four divisions, non-life (short-term) and life insurance, banking and credit between 1 March 2024 and 31 December 2024. Reana Steyn, head ombud and CEO of the NFO, says the sheer number of complaints received and the large sum of money recovered are testament to the NFO's effectiveness and commitment to fairness in dispute resolution and the power of independent mediation. 'This recovery of monies helped individuals and families regain lost financial stability, reinforcing the NFO's role as guardian of justice in financial services. The NFO has continued to solidify its role as a pillar in the South African landscape that ensures access for financial consumers to transparent and effective resolution of disputes.' The total amount of R328 550 212,58 that the NFO recovered on behalf of consumers is made up of R29 175 451,14 recovered by the banking division, R2 355 840,20 recovered by the credit division, R202 854 491,24 recovered by the life insurance division and R94 164 430,00 recovered by the short-term insurance division. The NFO resolves complaints on average within 115 days, while the banking division took on average only 52 days to close cases, the Credit division 79 days, the life insurance division 152 days and the short-term insurance division 177 days. ALSO READ: Banking Ombudsman puts R25 million back in consumers' pockets Banking division recouped R29 million for consumers Nerosha Maseti, the lead ombud for the banking division, says in the annual report that despite major internal changes, the banking division adapted seamlessly, handling and resolving complaints at a faster rate than the previous year, while maintaining a strong commitment to fair outcomes. The banking division opened a total of 15 412 cases and closed 11 535 successfully, recovering a total of R29 175 451,14 consumers. Most of the banking cases opened (20%) was against Capitec that had 1 203 complaints, as can be expected as it has the highest number of customers. The NFO founded in favour of consumers in 22% of these cases. FNB came in at a close second with 1 017 cases opened, representing 17% of all cases, with findings in favour of complainants totalling 16%. Standard Bank had 998 cases opened, representing 17% of all cases and 19% of findings in favour of complainants. Nedbank had 881 cases opened, representing 15% of all cases and 22% of findings in favour of complainants, while Absa had 812 cases opened, representing 14% of all cases and 13% of findings in favour of complainants. The top categories in the banking division were current accounts, personal loans, savings accounts, credit cards and home loans, while fraud remained the leading issue in consumer banking complaints, representing 30% of all cases. Complaints related to maladministration were the second highest category and debt-stressed consumers the third, reflecting the ongoing financial challenges consumers have to deal with. ALSO READ: FSCA finds banks do not handle consumer complaints properly Credit division recouped R2.3 million for consumers The NFO's credit division successfully closed 2 040 cases, achieving positive outcomes for complainants in 49% of cases and financial redress totalling approximately R2.4 million. The Retail Credit Solutions (RCS) Group had the highest number of cases opened, totalling 243, representing 17% of all cases opened. The division found in favour of complainants in 44% of the cases. OPCO 365 was in second place with 133 cases opened, representing 9% of all cases, while Edcon Limited had 126 cases (9%) and DMC Debt Management had 121 cases (9%) Howard Gabriels, lead ombud for the credit division, says two matters the division dealt with stood out for their systemic impact during the reporting period were about value-added services (VAS) and minimum payment calculations with a number of retailers. 'A serious concern emerged regarding the application of payments on credit accounts where VAS charges, such as airtime or insurance add-ons were not considered in determining the minimum monthly payments, leading to growing balances despite customers paying what they believed to be the full amount due. 'After we intervened, the affected credit provider agreed to write off inappropriate balances and amend its internal policy to ensure VAS charges are included in future minimum payment calculations.' ALSO READ: Here's what you can learn from Credit Ombud's case file Non-life division recouped R94 million for consumers The NFO's non-life insurance division closed 9 289 cases and recovered R94 164 430.00 on behalf of consumers. Edite Teixeira-Mckinon, lead ombud for the non-life insurance division, says complaints related to motor vehicle insurance accounted for 42% of all the complaints finalised/resolved. This was followed by homeowners' insurance complaints at 27%, commercial complaints at 14%, household contents complaints at 6% and other types of insurance and nonclaim-related complaints, combined at 11%. 'The highest number of complaints about motor vehicle insurance were about claims for accidents, at 62%, followed by warranty and mechanical breakdown claims at 18% and theft and hijack claims at 9%. 'The primary reason for complaints under this category of insurance was claims rejected on an exclusion in the policy. The leading exclusion was failure to prevent or minimise loss or damage, also known as a lack of due care, or recklessness.' Under homeowners' insurance, the highest number of complaints were about claims for loss or damage due to acts of nature at 40%, followed by bursting of water apparatus at 16% and theft and burglary at 8%. The primary cause for complaints was rejected claims based on gradual deterioration, lack of maintenance, or wear and tear, while disputes about the amount claimed were also a key issue. In this division, Santam Limited had the highest number of formal complaints at 684, followed by Standard Insurance Limited at 632, Old Mutual Insure Limited at 613, Absa Insurance Company Limited at 560 and Discovery Insure at 501. Life insurance division recouped R202 million for consumers The NFO's life division finalised 5 977 cases in 2024 and recovered a total amount of R202 854 491,24 for consumers. Denise Gabriels, lead ombud for the life division, says funeral benefits remained the product most consumers complained about, accounting for 45% of complaints. Declined claims were the most common cause for complaints at 56%, followed by complaints about poor service or administration at 34%. In the life division the most complaints were about Old Mutual at 628 formal cases, representing 18% of all complaints, followed by Liberty with 399 formal cases representing 11%, Hollard Life Insurance with 259 cases representing 7%, Metropolitan Life with 216 cases representing 6% and Sanlam Life Insurance Ltd with 188 cases representing 5%. Haroon Laher, chairperson of the NFO Board, says the establishment of the NFO was an act of bravery. 'Bravery in anything we do does not merely mean facing the loudest, or sometimes the most powerful, voices. It requires those involved to listen to the quietest whispers of those who have been wronged. 'It takes courage to confront an issue. It is this very courage, carried out through acts of bravery, that will define the NFO in what it does and achieves.' NOW READ: Funeral insurance tops complaints to ombudsman for long-term insurance
