People who need to apply to credit for small amounts of cash for whatever reason, or emergency, will most likely be those who don’t have the benefits of savings – that is the poorest in society. They may well also, be those, who are least able to understand financial calculations.
Given the incentives and offers of loans that plague cell phones & emails, this is an interesting judgement against the providers.
In this case, taken up by the Law Clinic, these are the figures quoted:
-borrowed R 5 600, has paid R 13 000, and still owes R 13 300,
-borrowed R 5 600, and paid R 17 500, and still owes R 2 200,
-borrowed R 16 000, has paid R 19 700, and still owes R 13 800,
-borrowed R 6 000, has paid R 14 300, and still owes R 10 000,
-borrowed R?00, has paid R 5 100, and still owes R 600, and
-borrowed R 5 000, has paid R 1 300, and still owes R 8000.
The full case (courtesy of SAFLII) is attached, and added highlights follow the key issue, without all of the technical legal argument. (For those short of time, or uninterested in reading legal cases.)
The key point is legal costs – the financial institutions listed, have been adding legal costs to the recovery of debt process – despite the National Credit Act 34 of 2005, which is specifically intended to protect the poor from excessive recovery costs.
The judge finds for the Legal Clinic, and finds that the loans should be recalculated, and the people involved refunded. The legal costs of this matter are attributed to the financial institutions.