CUSTOMER STORY
‘With a home loan it is imperative to prove the
customer’s ability to repay and continue to meet
the obligation, while a rental agreement does not
require the same assessment.’
agreement does not require the same assessment. As an example, an
unemployed person starting his first job away from home can sign
a rental agreement and move into the property, paying the monthly
rental with pocket money from his parents, but will only be able to
qualify for a home loan once he earns a salary and can prove that he
can afford the repayments.’
Kellerman says that banks do look at the behaviour of the customer
in meeting other credit and revolving commitments, including rent,
and the way the customer manages their transactional accounts.
However, he notes that owning a home may cost more than rental
payments, as the owner may need to pay for maintenance, rates and
taxes and in certain instances levies if the customer lives in a complex.
On the question of banks selling more unsecured credit at the
expense of home loans and due to the high margins, Kellerman says
the business case for each credit product has its own merits and FNB
is committed to lending responsibly.
A senior banking official Banker SA spoke to notes that one of the
factors that has led to more unsecured loans being granted in South
Africa is the high demand for them.
‘Borrowers have, for various reasons, put themselves in a situation
where their risk profile has deteriorated and they are unable to
manage long-term debt. Some of these reasons are the impact of a
slow economy, increases in administered prices and using secured
credit instruments to their maximum. Borrowers are thus moving
into the unsecured credit environment because they are able to
manage short-term credit,’ adds the official, who asked to remain
anonymous.
On the morality of offering more unsecured loans than the
ones that are secure, he says: ‘The moral issue to be raised is what
we, as a country, are doing about the circumstances that lead to
over-indebtedness and a culture of instant gratification, despite
consequences of debt.’
Lesiba Mashapa, company secretary of the National Credit
Regulator, concurs that there is no requirement in the National
Credit Act compelling credit providers to offer a special type of
credit. Mashapa says that credit providers are free to offer any type
of credit provided in terms of the National Credit Act, but he notes
that the National Credit Act empowers the consumer to ask for
reasons why credit has been refused.
On the question of unsecured lending being easily accessible than
secured lending, Mashapa adds: ‘One of the factors may be the lack
of deposit requirements for unsecured credit when compared to
mortgage agreements. The maximum interest allowed for a home
loan is lower than that for an unsecured loan.’
Asked why someone with a good rental repayment history would
be denied a home loan that requires lesser repayments than the rental
costs, Mashapa responds: ‘In terms of Section 60 (2) of the National
Credit Act a credit provider has the right to refuse to enter into
a credit agreement with any prospective consumer on reasonable
commercial grounds that are consistent with its customary
risk management and underwriting practices. On request from
a consumer, a credit provider must advice a consumer in writing of
the dominant reason for refusing to enter into a credit agreement
with that consumer.’ By Phakamisa Ndzamela
SECTION 62 OF THE NATIONAL CREDIT ACT STATES:
(1) On request from a consumer, a credit provider must advise that consumer in writing of the dominant reason for(a) refusing to enter into a credit agreement with that consumer;
(b) offering that consumer a lower credit limit under a credit facility than applied for by the consumer, or reducing the credit limit
under an existing credit facility;
(c) refusing a request from the consumer to increase a credit limit under an existing credit facility; or
(d) refusing to renew an expiring credit card