As the global economic crisis continues, unskilled and semi-skilled farmworkers are going to feel the squeeze on their already tight incomes. Farmers should educate staff to avoid the never-ending cycle of debt. Financial debt manager of FairDebt, Ray Williams, spoke to Lloyd Phillips.
Tell us about you, your company and what it does?
I am the financial manager of a company called FairDebt, based in Vryheid, KwaZulu-Natal. It was established to help the thousands of South Africans increasingly using credit facilities just to get by every month.
Many of these people are eventually drawn into a debt trap, either through applying for credit beyond what they can repay through unscrupulous money lenders, companies that offer credit facilities against goods purchased, debt counsellors, debt collectors or attorneys. The lenders, like companies and collectors, often don’t adhere to the credit laws and take advantage of poorly educated individuals.
This situation is fairly common in the unskilled and semi-skilled labour sectors, including agriculture. However, unscrupulous companies and individuals are also taking advantage of the educated like teachers and police officers.
So how does FairDebt help people get out of their private debt traps?
FairDebt’s message to its clients is: only repay what you owe. This means consumers in debt are protected by a number of legal rights to prevent them from having to pay back debt in excess of what they initially signed for. Or, as happens too often with the illiterate or poorly educated, from having to pay back amounts they were fooled into believing they owed. Unscrupulous credit providers and collectors have also been known to add hidden costs into amounts borrowed, and people are unaware that they’re having to pay these as well. Many poorly educated or illiterate people trust credit providers and collectors.
Where do the biggest debt problems come from for unskilled and semi-skilled farmworkers?
Furniture and appliance retailers are the biggest debt traps for these workers. Shop sales assistants often work on a commission basis, tempting them to push susceptible consumers to buy far more than they can afford. But what’s really shocking is that once credit providers and debt collectors have repossessed items from customers not able to meet their repayments, these now second-hand items are resold for a fraction of their original total cost – interest included. This means that only a very small amount will go towards decreasing the original debt and the farmworkers will continue paying massive instalments on items they no longer even own.
Most farmworkers will eventually accumulate debt far exceeding their monthly income and will be tempted to borrow more money to buy necessities like food. So the downward spiral into ever-increasing debt continues.
What are the implications when your farmworkers are in debt?
Farmworkers who get into debt believe they won’t be able to get out of it and might abscond to escape creditors. This costs farmers money in lost training investment, reduced production while a replacement farmworker is sought, and obviously the costs of training the latter. Remember not only the farmworker and the farmer will be affected by this situation – their families will also suffer. It’s worthwhile for farmers to try to keep their workers secure in their jobs and financial situations. Educating them in basic financial and debt management is a good investment. These farmers should encourage their workers to speak to them before deciding to take credit. Most farmers can understand a credit application document and could warn a worker not to enter into the agreement. If a worker is already in debt, the farmer could facilitate a meeting with a debt counsellor or even a company like ours to find a solution.
What should farmers do if they find out that some of their workers are being crippled by debt?
Farmers should not immediately think it’s solely their workers’ fault for getting into debt. They could’ve been exploited without fully understanding the situation. The farmworkers might even be borrowing money from the farmer in a desperate, but mostly futile attempt to make the debt go away. It would be in the best interest of farmers to get hold of a copy of the National Credit Act, as well as information about the rights of credit applicants, so that they can inform their workers of their rights. Most debt victims don’t know they have several rights protecting them, which can also help them get out of debt.
FairDebt is available to help these people out of trouble, and they or their employers can contact us. Being a private company, we charge a reasonable fee for our services. However, we believe that our success rate and recovery of money that’s been illegally collected renders our fee very cost-effective in the end.Contact Ray Williams of FairDebt on (034) 980 0480/9882
or fax 086 675 7207/(034) 980 7700 or e-mail
[email protected] or visit www.fairdebt.co.za. |fw
