Predatory Lending And Debt Abuse As A Human Rights Issue In South Africa

On Human Rights Day, Sebastien Alexanderson discusses debt abuse and predatory lending in SA, affecting consumers including 28M+ vulnerable social grant recipients.

20 March 2025: It’s Human Rights Day this week and as South Africans reflect on their rights and freedoms, a critical issue facing millions is the scourge of debt abuse and predatory lending. With an eminent result of over 42% of the country’s 23 million credit-active consumers classified as impaired, the threat is more than a financial statistic.

This is according to Sebastien Alexanderson, Head of National Debt Advisors, who said the consistent violation of the Right to Protection from Unfair Lending and Debt Abuse under the National Credit Act (NCA) of 2005 is a serious concern.

The Scourge of Reckless Lending

Despite the NCA mandating thorough affordability assessments by lenders to prevent reckless lending, Alexanderson said many South Africans still end up in debt spirals. “The allure of easy credit masks the harsh terms that often come attached, exploiting consumer vulnerabilities and leading to situations where loans are nearly impossible to repay,” said Alexanderson.

"In our experience, too many consumers are unaware of the risks until they are in over their heads. Reckless lending isn't just a failure of regulation; it's often a failure of knowledge," said Alexanderson.

Global Context and Local Impact

Globally, the issue of consumer over-indebtedness resonates in corridors from North America to New Zealand, with studies highlighting a common theme: a lack of consumer understanding coupled with aggressive credit expansion by lenders. In South Africa, historical inequalities and economic pressures compound these challenges.

Exploitation of Social Grant Beneficiaries

Currently, over 28 million people rely on social grants in the country, a group that remains vulnerable to financial exploitation. “Predatory lenders target these individuals due to their steady and guaranteed income. The 2012 partnership between SASSA and CPS created nearly 10.5 million SASSA-branded bank accounts, facilitating high-interest loans against social grants at rates of 30% to 100% per month,” said Alexanderson.

“Legislation and the 2018 transition to the South African Post Office (SAPO) enhanced protections for grant recipients by prohibiting debt security against social grants and preventing unauthorised deductions. However, enforcement challenges continue, and exploitation persists,” he said.

Rights Under the National Credit Act

The NCA provides a safety net, offering recourse for consumers who find themselves victims of predatory lending practices. “Loans deemed reckless can be contested and potentially written off if it is proven that the creditor did not observe due diligence. Moreover, recent regulations protect more vulnerable groups, such as recipients of social grants, from having their benefits unduly targeted or reduced by credit arrangements.”

The Dangers of Dishonest Credit Applications

While the NCA provides crucial safeguards against reckless lending, there's a hidden challenge that intensifies the debt crisis: dishonesty in credit applications. "We've seen a troubling trend where some clients, driven by desperation, inflate their income or underreport existing debts on credit applications," said Alexanderson explaining that such misrepresentations lead to loan approvals that consumers cannot afford, ultimately trapping them in a debt spiral..

“The consequence is a dual-faceted problem where consumers are trapped under the weight of debts they can never hope to repay, and lenders face increasing default rates,” he said.

Consumer Tips to Avoid Debt Traps

1. Educate Yourself and Assess Affordability: Understand all terms of any credit agreement and seek legal advice if unclear. Always assess your ability to meet repayment terms realistically without relying solely on the lender’s assessment.
2. Be Wary of Misleading Offers: Stay cautious of offers that seem too good to be true, as they often lead to predatory terms that change unexpectedly.
3. Report Unethical Practices: If you suspect legal breaches by a credit provider, report them to the National Credit Regulator (NCR).
4. Seek Help When Overwhelmed: Consider debt review, a legal process that helps manage debt through a structured and affordable repayment plan, while providing legal protection from creditors.

“Financial freedom is a fundamental human right and the path to achieving it is primarily through personal accountability and education. Consumers have a role in safeguarding their financial well-being by being honest in their financial dealings and proactive in their financial education,” said Alexanderson.

About National Debt Advisors:

National Debt Advisors is one of South Africa’s leading debt counselling practices and is perfectly positioned to help South African consumers who are struggling with their finances, become debt-free in under 60 months. NDA will negotiate with creditors for reduced monthly interest rates and extended terms – ultimately consolidating all debt repayments into one lower monthly installment - whilst protecting consumers from harassment by creditors, securing their assets against repossession and leaving them with more money left to live on. NDA will help South Africans gain their financial freedom.