The Credit Ombud says it has been inundated with calls from consumers threatening to commit suicide due to financial distress. It has reiterated that there seems to be a link between mental wellbeing and financial fitness.
Experts believe that having financial constraints and being indebted can lead to feelings of anxiety and depression.
October has been declared mental health awareness month with the aim of reducing the stigma and discrimination against people with mental illness.
Talking about financial issues is still taboo for many and this often leads to feelings of guilt and helplessness. Many people are reluctant to divulge their personal financial difficulties for fear of stigma.
This makes it difficult for consumers to get out of the depression and debt trap.
Senior Legal Advisor at Credit Ombud, Vitha Nofal, says some consumers feel lost.
“We have in the past received calls from consumers in dire financial stress. When consumers feel that they are lost, they end up going for more debt.”
The outbreak of COVID-19 has made 2020 one of the toughest years ever and many consumers are under financial distress due companies closing shop. Over 2.2 million people lost their jobs in the second quarter of the year.
The COVID-19 pandemic has worsened the debt situation of many young people:
Some companies have reduced their workers’ salaries as they battle to cope with the impact of the pandemic.
This has impacted consumer’s ability to meet their financial obligations.
The Ombud has called on consumers to inform their credit providers once they start to experience financial difficulties as this could help them to negotiate other payment options.
Nofal has urged people to prioritise needs as opposed to wants.
“As a consumer who are facing financial trouble, there are ways to get out of the mess. Budget and plan; what are needs as opposed to wants.”
The Ombud says it is not easy to prove reckless lending and that in some instances, consumers do not disclose their true financial situation when they seek credit from the financial institutions.
This can lead to consumers over extending themselves.
“If you don’t provide the relevant information, you cannot rely on reckless lending to protect you from the creditors,” says Nofal.
Ignoring your debt obligations is a recipe for disaster as the debt will not disappear, but will accrue additional interest and costs. If you ignore a letter of demand, judgement can be taken against you and the credit provider will have 30 years to collect the money owed from you.