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In times of distress, institutions have curators to look after them, but people don’t. This is perhaps the biggest lesson for consumers from the African Bank debacle. It’s a tough lesson, but learn it well.
African Bank Investments Limited, or ABIL, built a client-base of 3.2 million people, but is now under curatorship and faces huge losses. The management team, quite simply, lent too much money to too many customers who didn’t pay back their loans.
The authorities will presumably come up with new guidelines, recommendations, reserving requirements and the like. They always do … and therein lies the problem.
We get a spate of regulations that create the illusion something is being done and everything is now OK. It’s not.
We already have a raft of regulations. We have the National Credit Act, the National Credit Regulator, RICA, FICA and the Consumer Protection Act. Banks have Know Your Customer requirements and another set of regulations called Treating Customers Fairly.
This rigmarole costs companies billions. Compliance costs have to be paid by someone. Who? You guessed: You and me. Because banks and businesses include these costs in the price of the goods and services we pay for.
The illusion that there’s a point to all this is dangerous.
Imagine an ABIL client taking out a loan. The bank worker gives him a form. There are one or two processes to go through. The borrower might even be fed some alphabet soup while he waits … FICA, KYC, NCA and NCR.
He gets his loan. He’s reassured. If the bank thinks he can afford it, he must be able to afford it. The rigmarole says everything’s all right.
But as ABIL found out, everything isn’t all right.
We are completely over-governed in this country. But don’t expect regulations to save you. If you don’t look out for yourself, no statute will.
I grew up in a value system that said: buy only what you can afford, pay in cash, never get into debt, but if you do, pay it back as soon as you can.
But a new generation has been fed the notion that waiting and saving wastes time. Grab the goods and the good times now, sort out the details later.
Unfortunately, the details tend to sort you out and you wind up in trouble with the bank or the credit retailer. It makes a change for the bank to wind up in trouble this time, but that’s scant consolation. The bail-out will cost money … and we’ll end up paying.
The best consumer protection is not the Consumer Protection Act. The best protection is to stay alert, know your rights and affordability limits, ask questions and don’t be too trusting. Be the sceptical, informed consumer and you just might be all right.