Don’t fall into credit agreement trap

“You should desist from the temptation of entering into credit agreements over the phone, though this is legal, people do not have the opportunity to see and carefully consider all the implications and costs” says Credit Ombudsman, Manie van Schalkwyk.

At no cost to consumers, the Credit Ombudsman has between January and June 2011 been able to resolve cases and saved consumers approximately R1 387 200. “In addition, consumers benefit from our relatively short turnaround time,” says Van Schalkwyk, whose office has resolved 1953 disputes in the same period.

Van Schalkwyk says: “Not rushing into a credit agreement would give you enough time to read and understand your rights and obligations before you sign a contract which would then bind you to the terms and conditions thereof.”

“When going through your credit agreement make sure that the description of the goods is clearly stipulated on a contract, as well as all the costs,” he says, putting emphasis that you should understand the implications of the interest and monthly cost which include administration fees and especially the added insurance costs. “The added interest and insurance and monthly service fees often add up to double the original amount of the goods,” says Van Schalkwyk.

He advises that you should not enter into credit agreements when you are not permanently employed. “If you are on a contract and it ends, there is a big risk of not being able to keep up with installments,” he says. This failure will affect your credit record and could result in the matter being handed over for collection,” he says.

“In addition to owing the debt, the costs that arise from legal and collection fees could run into thousands,” he warns.

The Credit Ombud office handles many disputes about the collection process in general. “Many consumers file complaints about debt collection agencies that put additional costs onto an account after it had been handed over to them,” says Van Schalkwyk. This is one of the consequences of not paying the debt in time and in full and could have severe financial implications.

Another common type of complaint revolves around issues in relation to statements of accounts – which range from not receiving an account, incorrect entries to disputes over the balance. Sometimes human or system errors could be the cause of miscalculations or incorrect statements.

Consumers are also not informed of their rights in relation to the cancellation of credit agreements. “Sometimes you would find that a consumer wants to cancel a contract and wants to know what their rights and obligations are, for example the cooling-off period,” he says. “In the case of repossession or voluntary surrender, there is usually still a shortfall and the consumer is still liable but no longer has the benefit of the good that was purchased.”

To avoid breaking your contractual obligations, Van Schalkwyk says you should:

– Pay your credit accounts timeously;

– Do not accept credit you cannot afford to repay;

– Always inform your creditors of your change of address;

– It is advisable to pay your credit accounts by debit order rather than cash;

– Check your account status regularly; and

– Read and understand the contract terms (especially your obligations and the credit provider’s rights in case of breach).

He points out that his office does not impose penalties if the credit provider was found in the wrong. “However, if for example, there was an overpayment or miscalculation, we would ensure that those amounts are either written off or paid back to the consumers,” he explains.

“Whether you enter into contracts telephonically or otherwise, in all instances, consumers are encouraged to always ensure that they know what their rights and obligations are,” he adds.

Consumers can contact the Credit Ombud office on 0861 66 28 37 or visit