Credit profile of consumers worsens, but not all is bleak

THE credit profile of South African consumers, which deteriorated for a 10th successive quarter in the three months to June, was poised to show a pick up, the National Credit Regulator said yesterday.

The proportion of credit users with records marked as being in “good standing” slipped to 53,1% in the June quarter from 54% in March, while those with “impaired” records — three or more months in arrears, with a judgment against them or an adverse listing such as absconded or in default — increased to 46,9% in the June quarter from 46%.

There was an increase in the proportion of people with adverse listings, to 15,6% from 15%. This indicated a worsening in the situation of people already in trouble, rather than new numbers falling into distress, a regulator official said.

“This is not new people defaulting. People already stressed are moving down the rung,” said Darrell Beghin, the regulator’s manager for credit information and research.

“You would first be current, then ‘not paid’, then three months behind, and only then do creditors start to take some action. They start doing adverse listings. This is not necessarily a panic message. Those who were already impaired are moving through the process.”

The Reserve Bank’s September quarterly bulletin released yesterday shows consumers are continuing to reduce their debt levels. Household debt as a proportion of disposable income fell to 78,2% in the June quarter from 78,7% in March. Revised figures show it peaked at 82% in the first quarter of 2008.

The cost of meeting debts is also falling. The ratio of debt-service costs to disposable income fell to 8% in the June quarter from 8,2%, the quarterly bulletin said.

While the profile of SA’s 65,28- million credit accounts also worsened in the June quarter, the picture was not all bleak. The proportion of accounts in good standing declined — to 73,9% from 74,1% — and the proportion listed as impaired rose to 26,1% from 25,9%. But the proportion of accounts listed as “current” showed improvement, to 65,4% from 65,1% in the three months before.

There are also signs of new credit being issued. The number of inquiries to credit bureaus by, or on behalf of, consumers seeking credit was 10,28-million, a 4,4% increase on the previous quarter and 19,5% up on a year earlier.

With the picture mixed, it was necessary to wait another quarter to see how World Cup-related spending influenced people’s ability to make debt payments, Ms Beghin said.

“The December quarter saw lots of impairments and scary news. The first quarter of 2010 started stabilising. Now there is moderate growth and it is fairly stable. It looks like it might be good news, but we need more time to say yes, it is!”

Article by: Michael Bleby - www.businessday.co.za