Author: Michael Bleby
Published in Business Day, Page 2, 17 July
2010
BANKS and credit providers are stepping up efforts to recover
bad debts, even as they start relaxing lending criteria, figures
from the National Credit Regulator show.
The number of inquiries lenders made to credit bureaus for the
purpose of tracing and debt collection jumped almost 16% in the
three months to March to 18,57-million, the latest quarterly
credit bureau monitor report shows.
Over the same period, the number of inquiries made as a result
of consumers seeking to take out new credit fell almost 5%.
Inquiries to credit bureaus, which store the records of SA’s
18,2-million active borrowers, are made by both consumers and
lenders, and the reasons for inquiries include providing sales
leads for new credit products, vetting new loan applications,
and debt collection and enforcement.
The growth of inquiries for debt enforcement purposes in the
three months to March, the fourth straight quarter to show
vigorous debt collection-related inquiries, shows lenders are
now calling in their loans. “Credit providers are more and more
starting to follow up and enforce where they have arrears,”
National Credit Regulator CEO Gabriel Davel said yesterday.
Further evidence of this comes from the figures illustrating the
deterioration of the South African consumer’s debt profile. The
number of people with credit records marked as “impaired” —
those with accounts three months or more in arrears, with an
adverse listing such as “absconded” or a judgment order against
them — rose to 8,37-million, or 46% of all active credit users.
While this suggests a continued deterioration of the sort seen
for the past three years, the quarterly decline came from
increases in adverse listings as well as judgments and
administration orders — moves sparked by debtor action.
The “natural” deterioration of debts that fell into three or
more months in arrears — reflecting a failure by debtors to keep
paying their obligations on time — actually improved, with this
category of debtors improving slightly to 17,2% of the total
from 17,3% in the December quarter.
In contrast, adverse listings grew to 17% from 14,6%, and the
category for judgments and administration orders rose to 13,7%
from 13,3% as a proportion of all debtors.
“It’s not as if the level of arrears or debt stress is
deteriorating,” said Mr Davel. “It’s much more the enforcement
of action by credit providers.”
Nonetheless, the overall profile of South African consumer debt
continued to worsen in the first quarter. The number of people
recorded as being in “good standing” — with accounts marked as
current or no more than one to two months in arrears — slipped
to 54% of the total from 54,7% in the December quarter, to a
total 9,84-million people.
The pace of both deterioration of good records and the growth in
impaired records was faster in the March quarter than either
measure saw in the December quarter. Still, both measures show
smaller changes than they did midway through last year, leading
Mr Davel to repeat earlier comments that the worst may well be
over.
Others repeated the sentiment.
“Nonperforming loans have peaked. Generally, financial services
institutions are more bullish about the future,” said David
McAlpin, CEO of Cape Town-based PIC Solutions, a credit risk
consultancy.
Still, other reports show loans for big-ticket vehicle loans and
homeloans are growing more slowly than shorter, unsecured types
of credit.
The number of active credit accounts grew in the March quarter
to 64,75-million, from 63,94-million in the December quarter.
This increase was almost double the increase of 400000 accounts
seen in December from September.
This was a sign of debt stress, as cash-strapped consumers took
advantage of better credit availability to take out loans to
tide themselves over, consultancy Econometrix said in response
to yesterday’s report.
Mr Davel disagreed: “Small amounts of credit have grown much
more than mortgages or motor vehicle loans. Does that indicate
stress? I’m not certain.”
blebym@bdfm.co.za
