Unemployed with debt. It’s not the end for you.

As a consumer who has just lost your job or have had your salary reduced, it has become difficult to distinguish which of your priorities may be at the top of your list. You are in survival mode and would be inclined to ensure that your basic needs, like food, water, warmth, and rest are catered for. When it comes to debt, you may be more concerned with your mortgage bond as you want to save that which gives you warmth and rest.

We cannot turn a blind eye to the frustrations brought on by the lockdown which may have resulted in your job loss or salary reduction. And even in these difficult times where you are caught between a rock and a hard place; in trying to protect lives and livelihoods, you can’t help but become anxious about your debt.  

The Credit Ombud wants to remind consumers that there are ways to ease the woes that come with being unemployed while having debt:       

  1. Speak up! Avoiding your credit providers only makes matters worse. Communication creates a healthy relationship between you and your credit providers. Due to the pandemic, credit providers have introduced some relief measures for consumers and once you contact them, they will advise on the available measures that would suit your needs. Here are a few measures to take into consideration:   
  • Credit life insurance: Check that you had/have credit life insurance, and that prior to your current situation you were paying your accounts timeously and that you kept to your monthly payments. Credit life insurance provides security in a case where you are unable to repay your debts due to retrenchment, disability, or death.
  • Surrender of goods: Do not wait for your credit grantor to take legal action and start with the collection process before you approach them with this option. When considering surrender of the goods, make sure that you understand that if the goods are sold at an amount that is less than what you owed, you may still be liable for any shortfall payable. 
  • Payment holiday: Many creditor providers have provided a payment holiday to consumers at the beginning of lockdown in 2020. A payment holiday may mean that you may not have to pay for certain months and this may afford you with a breather. It is important to note that interest will continue to accrue, and your payment term will be extended to cover the months which you couldn’t make payment.  
  • Debt review: If your salary was reduced, you may approach a debt counsellor who will negotiate with your credit providers for a lower installment. You need to beware though that this will mean that your repayment term will be extended as the interest will accumulate. Importantly, you will not be able to take on further credit until you have paid up your debt and receive a clearance certificate. It will reflect on your credit report that you are under debt review.  
  • With all available measures it’s imperative to know how your credit report will be affected. The hard reality we need to face as consumers is that even though we make these arrangements with our credit providers, they are still obligated to submit your account data to the credit bureaux and your credit report may be negatively impacted.

Here’s an example of a case which the Credit Ombud has dealt with relating to Covid-19 relief:

Ms Peters* approached our office for relief as she did not receive a salary for 3 months of the lock down and was experiencing problems in having her credit life insurance payout for these months. Ms Peters then escalated the matter to the Credit Ombud office. Through our intervention we assisted by liaising with the credit provider to have her request/application assessed and it was successful. The credits relating to the credit life payouts were passed, and the matter resolved.

In instances where there is no credit life insurance it depends on the credit provider on how best they can assist the consumer. We cannot compel a credit provider to suspend or amend the obligations of a consumer. Should a consumer believe that they are unable to service a debt it is imperative that they contact the credit provider immediately to assess what can be done. The Credit Ombud is not a debt mediator and we can only assist if a consumer is experiencing problems in having their current credit life insurance application assessed or are experience delays by the credit provider.

With these options available, consumers have the opportunity to rehabilitate themselves.

*The name used has been changed to protect the privacy of the consumer.