After the festive season, which usually comprises of gift-giving, holidaying and unusually high spending, South African consumers reach the end of January in a predicament of owing lump sums of money, which they cannot afford to repay. This is exacerbated by the cost of school fees and school clothes in January. According to DebtBusters, one of South Africa’s largest debt counselling companies, the 27th of January will lead to a debit order disaster, consequently pushing thousands of consumers further into debt.

In South Africa, employees are paid in the middle of December, and when they return to work early January, they usually have three more weeks to make ends meet before they receive their next pay check. However, many consumers have found themselves facing a festive season financial hangover, and are strapped for cash. In addition, consumers are either unable to take out further loans or have to turn to taking out short-term, high-cost, smaller loans, where they continue to watch the interest rates on their debts pile up. DebtBusters CEO, Ian Wason, states “The end of January is here and consumers have reached the end of their credit line before they receive their January pay check.”

The 2012/2013 festive season saw an increase in the number of client enquiries on Christmas Day and New Year’s Day. Ian Wason comments “DebtBusters has experienced 85% year on year growth in the amount of debt counselling applications, and including applications to Consumer Debt Help, our low income division, this puts growth above 100%. More and more consumers are seeking financial protection and are choosing to go under debt review.” According to the National Credit Regulator, reviewing the industry as a whole, there has been a 29.5% increase in the number of debt counselling applications from January 2013 to December 2013.

Ian Wason goes on to say “the most striking statistic we are seeing at the moment, is before signing up for debt counselling, the average DebtBusters client spends more than 100% of their net income servicing their debt, without taking into account their living expenses. This has risen from, 80% a year ago, and is largely because the dramatic increase in ‘pay day lending’. With the Rand tumbling and petrol prices increasing it is shaping up to be a terrible financial year for South African Consumers.”

“Of the 20.29 million credit active consumers in South Africa, 9.76 million have impaired credit records. This means that these consumers have failed to make three or more monthly payments, or have an adverse listing, judgement or administration order,” says Wason.