1. Consumer protection policies and practices
INTEREST RATES AND OTHER CHARGE FEES
DEBT COUNSELLING, RECKLESS LENDING, PYRAMID SCHEMES
Grade 11 Term 3 Week 9 Lesson 3

2. INTEREST RATES
In addition to the principal debt (original amount borrowed), the consumer must pay interest to their credit providers
Interest is expressed as a percentage for one year e.g. 10% p.a.
It is the cost of borrowing money

3. Other charge fees
Initiation fee: can be charged when the consumer accepts the credit agreement
Service fee: charged by banks for transaction using a credit card
Credit insurance: Charged to protect the credit provider if the consumer cannot pay the debt
Collection costs: amounts charged for collecting outstanding debts from the consumer
Interest on overdue accounts: customers are charged for unpaid credit accounts

4. Debt counselling
If a consumer cannot pay his/her debts, he or she has the right to go to a debt counsellor
A debt counsellor mediates between the consumer and the credit provider after assessing the consumer’s debt situation

5. 3 ways to access debt counselling
Consumers can approach debt counsellors voluntarily
Credit providers can refer consumers to a debt counsellor if the consumer is behind with payments
If a court finds that a consumer is over- indebted, it may also refer the consumer to a debt counsellor.

6. Debt counselling
During the time of debt counselling a consumer may not sign any credit agreements
Once all the debts have been paid, the counsellor will issue a clearance certificate to the consumer

7. Reckless lending
Reckless lending is when a credit provider lends money or offers credit to a consumer who cannot cover the monthly instalments
The NCA aims to stamp out reckless lending with severe penalties and the credit provider may even lose the right to recover the debt

8. Micro lending Micro lending refers to a loans of R10 000- R15 000
These loans are now regulated by the NCR
Micro lender may not charge an upfront fee for credit application
They may not keep the
consumers’ ID’s,
bank cards or PIN’s as a
collection method
Interest rates are
also monitored

9. Pyramid schemes
Pyramid schemes are “get-rich-quickly” money- making schemes exploiting people
They promise people payment just for enrolling other people into the scheme
Every person pays the person who recruited them a fee. This is how people make money, especially the first person
Pyramid schemes cannot go on forever, so many people lose their money this way
Pyramid schemes are illegal in South Africa
and if you lose money in a pyramid scheme the
law will not protect your investment