Microlenders to blame for wage demands

[Dave A]

What's the difference between micro lenders and macro lenders? Why bash the small guy?
Small guys, do small damage.

Micro lenders aren't necessarily small operations - they just specialise in small, short term loans - typically at very high interest rates.

The effect on disposable income of pay day loan operators in the UK has also come under fire in the past week or so - a very similar issue. (EDIT: I see IanF has also brought up this point while I was drafting this response.)

Also, the individual operators may be small by comparison to the big banks, but do not underestimate the size of this sector as a whole, and its ability to significantly affect the shape of our economy - especially in the low income bracket.

Dave I wonder why Trevor Manuel did not bring this up or maybe it was ignored by the reporter?

I've been chewing over that, and on reflection I suspect "in duplum" and pretty much the rest of the NCA is near worthless as a measure to control damaging credit provision in the micro loan market. These are aggressive operators not averse to risk and stretching the law past its limits, both in credit extension and collection.

It's a problem that is definitely going to need a multi-faceted response.

[adrianh]

There is an additional problem. When I was down and out I owed a dentist R1,500. They eventually handed me over to their lawyers. The lawyer phoned me a day later and told me that I now owe the lawyer R2,100. So, the lawyer makes one phone call and he feels that it is worth R600. I told the collection lady exactly what i think of her, her boss, her boss's dog and where they can all go jump off. I paid the dentist R1,500 directly and zero to the lawyer. We wait and see whether the lawyer is going to try to get the R600 from me.

Ok, so why do I tell you this story; simply because the people who are already in the crap because the owe money and pushed deeper into the crap by lawyers, debt collectors etc. The problem is far bigger than micro lenders, the problem goes across board, the only difference between a macro and a micro lender is that the oe takes your house and the other takes your kneecaps.

[bjsteyn]

There is an additional problem. When I was down and out I owed a dentist R1,500. They eventually handed me over to their lawyers. The lawyer phoned me a day later and told me that I now owe the lawyer R2,100. So, the lawyer makes one phone call and he feels that it is worth R600. I told the collection lady exactly what i think of her, her boss, her boss's dog and where they can all go jump off. I paid the dentist R1,500 directly and zero to the lawyer. We wait and see whether the lawyer is going to try to get the R600 from me.

Ok, so why do I tell you this story; simply because the people who are already in the crap because the owe money and pushed deeper into the crap by lawyers, debt collectors etc. The problem is far bigger than micro lenders, the problem goes across board, the only difference between a macro and a micro lender is that the oe takes your house and the other takes your kneecaps.

Hey @AdrianH, i feel your sentiments. About a 2 years back, i was earning about R3500 (doing computer programming, believe it or not). I was working at the company for about 3 months, yet FNB gave me a lone for R25000 and I had to pay back R50000 over 3 years.. That was my first real permanent job, up until that point i was working for myself and i was not getting by because it is hard to work for yourself if you don't have transport. So i said OK ill take the job, it is something to put on my CV and thought they are just gonna look if i can do the job and raise my salary and they will relise that i know what i am doing. Didn't have transport and took out the loan, so i can get my own business going partime, doing IT stuff. I baught a new bike and after 6 months i was only earning R3800. I realised, im gonna go nowere at that company, as they want quantity not quality and was getting behind on my loan repayments. So i decided to quit the job, hell i could earn more working for debonairs. Neways, had to sell the bike, but still sat with the debt of about R42000.

I couldn't pay for a while and they handed me over to the lawyers. I have a solid job now, and have gotten what i ow down to R20000. But in March this year I made a payment for R1400, that 3 months later still hasn't been deducted off my fnb loan account, that i have paid interest on for 3 months that i shouldn't have. I have emailed the lawyers about 7 times about it and everytime i receive a return receipt that someone has read my mail (actually several per email, they definitly read it more than once) , but yet they do not respond to me.

I have also spoken to them on the phone about it about 3 times (When they make their monthly curtisy call, haha) and every time they say, they will look into it, yet nothing is done. So emailed them again and said i will not pay again until they sort it out.

Well today they phone me again (yes, i didn't make a payment this month. Took the money i normally paid them and invested as an short term investment to make back the interest i shouldn't have paid), and they threatend me that i will have to pay lawyers fees if i don't make a payment this month, yet i mention the missing money again. Again they said they will look into it today and get back to me, although that was second priority to them wanting a payment from me, and again they did not get back to me. They expect me to make a payment to them, yet R1400 of my money paid to them has gone missing and i have paid interest i shouldn't have.

I feel like taking them (fnb lawyers) to the lawyers and fnb as-well as a matter of fact. The lawyers for the R1400 that has gone missing, the interest i paid and all the stress they put me threw phoning 2 times, sometimes 3 times a month.(Haha, while im suing them why not add that!) . FNB because i was bound to fail on loan repayment on the salary i was earning, and they shouldn't have loaned me that money. I have no idee how they approved that loan. I wanted it, but they shouldn't have given it to me (now looking back)

If i could go back i would have never taken the loan in the place i was, but that is how you learn from your mistakes!

[bjsteyn]

Microlenders like wonga, definitely can help you when you need some urgent cash flow, but then again it is to easy to take a loan and you get into monthly habit of taking a loan. Yet your salary is actually going down every time you take a loan. I used them to get some cash flow (over 5 months) for paying of a new laptop and samsung galaxy note i baught threw the company i work at, to be more productive, yet i new i was losing money. My reasoning was that i know i am losing money, but with the right tools i will be more productive and earn the money back twice, as i am a entrepeneur always looking online and offline of ways making money. My cash flow is almost right again.

Eg. of how a monthly loan can get deteriarate:
Jan i take a loan for R750 i pay back a R1000 month end
Feb comes i am short some money so i am still short what i was last month, but an extra R250 as-well so i take another loan for a R1000 and pay back R1300 month end,
Mar comes and i take a loan again, what i was short last month, plus my interest on my loan, so total R1300. I pay back R1600 month end.
See where i'm going with this?

A micro loan will not sort out your money problems, it will make it worse. It is a temporary solution, which you should only use if
you have already formed a real solution to sort your money problems or if it is a once off thing.

Anyways, i hope i have a real solution, i believe i have and am woking on it every day, the light is near!

[Blurock]

Cash is king! One can only be free if you have no debt, morally or financially.

[Dave S]

Cash is king! One can only be free if you have no debt, morally or financially.

+1, or at least have enough cash to cover any debt you may have

[Dave S]

Problem with the borrowing of cash from anywhere, micro or macro lenders, is that the people borrowing this cash are often in need just to buy food as their salaries are too low to support them, and the "vicious circle" trap is "the more you borrow, the more you need to pay back, the more money you need, the more you need to borrow".

If one looks at the world in general, there is "x" amount of income available, the high income of one person is offset by the low income of another, and so on. If everyone was earning a "living wage", then nobody would have any luxuries and massive corporations would tumble. The balance of nature (albeit, man-made), there has to be poor people and there has to be rich people, it's just the ratios are becoming corrupted by massive population growth, world-wide.

[IanF]

The saddest thing I have seen is a lady buying groceries in front of me in the queue and asking for that to be put on budget.
BJ the sooner you can get out of the the money sucking lawyers clutches the better. If I was you I would have a look at the in duplum rule and enforce that if you have paid back more than twice your debt. But the definition of debt for that rule is not easy to interpret to me.

[bjsteyn]

The saddest thing I have seen is a lady buying groceries in front of me in the queue and asking for that to be put on budget.
BJ the sooner you can get out of the the money sucking lawyers clutches the better. If I was you I would have a look at the in duplum rule and enforce that if you have paid back more than twice your debt. But the definition of debt for that rule is not easy to interpret to me.

I am going this weekend to fnb, to see if they can move the account back to them and away from the lawyers, and just deduct it from my bank account monthly. I have no idee how much of what i am owing is interest and how much is from the actual loan money.

If i understand the dumplum rule correctly, then the unpaid interest on the money i ow, can not be more than twice what i loaned. My total outstanding is R20000 so it is not even more than what i loaned, so even if all of it was interest dumplum would not apply to me. :-(

[ians]

I got into a habit of always keeping my suppliers aware of my intentions and up to date with what was going on. I found they will let you ride out any cash flow issue you have for example or if you have a bad paying customer. IF I say I am going to pay on the 15th then I pay on that date, if I cant for some reason I make them aware days in advance.

It worked well until recently when one of the suppliers was bought out by someone else, I paid R30 000 as I promised on the Friday afternoon, Monday morning I went in to buy more stuff I was told my account was on hold, I battled for a month or 2 to scratch the money together to complete the project, got paid the full amount and paid all outstanding debts, except 1, that was last year in October, they are still trying to get the balance of the money out of me. The money is sitting in a savings account while they sort out all the legal stuff. Their lawyer sent me a whole lot of warning threatening letters, I am busy negotiating a settlement figue less the lawyers fees and less than the original figue.

My point...stick to your word and communicate with people it makes life so much more pleasant.