What you need to know about loan offers

But this year there’s also interest rate and petrol price increases to contend with, and the drought pushing food prices up, so things are pretty bleak. 

For those who were barely coping financially at the end of last year, things must now seem quite desperate.

Whatever we’re desperate for - to lose weight, stop hair loss, get a job or get a loan, our desperation makes us vulnerable, it makes us less cautious, and it often overrides our common sense.

And sadly there is no shortage of companies willing and able to exploit that desperation.

Especially when it comes to loans. 

So first there’s the scam where fraudsters pretend to be legitimate money lenders, for example Halifax, a UK bank or, more Wonga.

Wendy shares a few know-hows

*Legitimate money lenders do not ask for upfront fees, just as legitimate employment agencies do not ask job seekers to pay application fees.

*Scam artists generally use free and anonymous e-mail services such as yahoo and gmail; offer totally unrealistic interest rates, do no credit checks and approve loan applications ridiculously fast.

*In terms of the National Credit Act, a credit provider is required to be registered with the National Credit Regulator. Always ask for a registration number, then do your checks.

The loan complaints I get most regularly concern companies advertise online: “Need a Loan? APPLY HERE”. People click through, fill out an online application form, supply all their details as requested and tick a box stating they’ve read the terms and conditions, when actually they haven’t.

If they had, they’d had discovered that they are not, in fact, directly applying for a loan; they’re applying for a “convenient service package” including “advice assistance” over the phone for personal injury, litigation, wills, domestic violence, harassment, motor vehicle accidents and, my personal favourite - a General Advice Assistance Service.

Note: the company names have the word LOAN in them

And by just submitting the application, they are committing to a 12-month contract - R400 up front then R99 a month for the remaining 11 months… And if you cancel there’s a hefty cancellation fee…

So how likely is someone who desperately needs a loan, knowingly agreeing to pay a few hundred Rand for some random services they may or may not need in the coming year? Not very, if you ask me.

Gugu's story 

A woman called Gugu summed up this scenario really well in an email to Consumerwatch last week:

“My husband and I recently had some financial difficulties and found ourselves desperate for a personal loan,” she wrote.

She found a company she thought was a loan provider, and filled out what she thought was a “harmless” loan application online. 

She was then sent forms to fill in and asked to return them with personal documents in order to process her application.

But she got cold feet and decided not to go ahead with it.

“I thought that was the end of it as I never sent them any of my documents and therefore was under the impression that there was no contract especially since there was no loan paid out to me,” she wrote.

“This month they decided to debit my account with R399. 

“I don’t know why they would do such a thing and my worry is that I don’t know if they are planning to deduct more and the last thing I need is to lose more money or even worse be listed on credit bureau for something I have no knowledge of…”

What Gugu said next sums up this scenario…“I think my biggest mistake was to need the cash so badly that I didn’t question why they would ask for my ID number and bank details on the “online application” form. I believe they are just taking advantage innocent people who are vulnerable.”

But the big question is - is it legal?

Well yes, unfortunately, because the full nature of the “service” and the fixed term contract is all disclosed in the small print on the websites. It’s there for the reading, but many just don’t go there. 

In my opinion, it’s an elaborate trap.

One company appears to be behind a whole of different “loan company” brand names with the same modus operandi online. 

I emailed them a set of questions about what it is that they do, and late yesterday instead of the response I was expecting, I got an email telling me that their “legal representative” would respond to my query “as soon as possible”.

So it’s a to-be-continued show this week, but I wanted to get the warning out as soon as possible.

What to do 

Never, ever ignore the terms and conditions of a contract or on a website, and read every word of them.

Never supply your bank details online, other than to pay for goods or services on the secure site of a well-known, reputable brand.