While everyone likes to have a lavish and fun filled Christmas, Nomsa Motshegare is urging us to spend wisely.

In an attempt to curb the spending of debt-laden South Africans, Motshegare is getting ready to toll out its pre-xmas “clever spending” campaign.

Motshegare is the COO (Chief Operating Officer) for the National Credit Regulator (NCR) is concerned about new statistics released from credit agencies that show consumer bad debt was on the rise and is warning against lavish spending over the Christmas period to help prevent further increases of bad debt and and lengthier periods of hard times for consumers.

Motshegare said “We believe this could go on for some time… we will be launching an annual education campaign to warn people against falling deeper into debt.

South Africans are, collectively, understood to have over R1 trillion of debt which is related to credit cards, bank loans/overdrafts, home loans, car repayments and higher purchase agreements.

While interest rates were cut in December, Motshegare is advising that it would take some time for a positive impact to be felt by consumers and that tough times could continue until the latter part of 2010, as per statistics provided by the South African credit agencies. She also mentioned that debt counsellors had helped, and were continuing to help, thousands of consumers from financial meltdown.

Continuing, Motshegare said “The figures are gloomy, but not alarming. As the slew of recent rat e reductions starts to kick in, people will have more disposable income. The country will benefit from the 2010 World Cup and financial institutions will relax their credit regulations, resulting in people accessing loans again.”

However, Martin van Schalwyk, the Credit Information Ombudsman, was warning consumers that the situation is far from pleasant and that there had been a 30% increase in the amount of cases that his office had received from quarter 1 to quarter 3.

The ombudsman resolves complaints from consumers and businesses negatively impacted by credit information – mainly people who feel they have been wrongly blacklisted. “Many people are blacklisted without knowing it, or without (the regulatory) 20-day notice,” he said.

CEO of the NCR, Gabriel Davel, advised that when broken down, the average consumer had 10 credit agreements outstanding, many of which were in arrears and had, or were due, legal action. He urged credit providers to achieve a suitable plan for the restructuring of debt that was acceptable to all parties. Financial institutions granting loans too freely were not let off the hook. Davel said some of the most worrying practices investigated over the past year related to housing finance. “This often implies that debt-stressed homeowners are targeted with offers of finance. These schemes often involve an element of fraud and misrepresentation, resulting in the borrowers losing their homes.”

Assessing the current financial situation, Econometrix, the Johannesburg consultancy, said the increase in impaired records and drop in accounts in good standing was not surprising, since the peak in interest rates, combined with a high level of household indebtedness, high food inflation and the surge in fuel prices in 2008, had hit household balance sheets.

Falling house prices and lower share prices had also made it harder for many consumers to maintain payments. The situation had been exacerbated by the tightening up of credit requirements by the commercial banking sector – from extreme generosity in lending to being reluctant to advance funds, even to worthy customers.

The dramatic rise in enquiries by debt collection agencies and related to telecommunication services, in particular, is noteworthy.

Investec economist Annabel Bishop said the bank saw no immediate recovery prospects for retail sales, as the underlying drivers – employment, growth, disposable income and consumer confidence – were low.

“We expect recovery to be slow, driven by global recovery, low inflation and recent interest rate cuts. We expect sales to remain depressed for the remainder of 2009 as households readjust balance sheets and focus on reducing debt levels,” she said.

The economy would remain under pressure until the end of the year, continuing to impact on employment, household income and the property market, said managing executive of Absa Home Loans Luthando Vutula.

He said consumers should keep expenses under control and make purchases based on their financial position.

“When there is extra cash available, it’s easy to be tempted to splurge. But let’s encourage our customers to save a few rands for that much-talked-about “rainy day”.

“We continue to encourage home owners to deposit surplus cash into their mortgages,” he said.