Media Release The Life Offices’ Association (LOA)

Created on Tuesday, 12 December 2006 13:38

Life industry funds counseling service for public servants struggling with debt The life industry’s financial literacy training workshops have reached more than 2 500 government employees over the past six months, with almost half admitting to struggling financially as a result of debt repayments. Lerato Mametse, Communications Manager at the LOA, says this finding emphasises the need for combining financial literacy training with financial wellbeing consultations. " There is no point in teaching people how to budget and save if they are struggling with debt. Before we can expect participants to apply what they have learnt at the workshops, we need to help them reverse their negative cash flow situations where income after living expenses is less than actual debt installments. We do this by giving all participants access to financial counselors via a confidential telecare service.” The telecare counselors analyse each case in detail and then find appropriate ways to help the person. These may include helping them identify unnecessary expenses, restructuring their debt by renegotiating repayments, and getting them out of the clutches of unscrupulous loan sharks, often through legal action. Workshop participants with emolument attachment orders (court orders allowing for debt collection) against them can also use the telecare service to have their orders audited to ensure that the correct amount is being deducted. The LOA’s Financial Wellness Programme is run by The Careways Group, which specialises in providing corporate employee wellbeing services, including helping employees gain control of their finances. The Careways Group has found that the single biggest reason why people earning R12 000 or less a month experience negative cash flow is not excessive debt, but rather excessive repayments brought about by exorbitant finance charges. It was found that people with short-term (or consumption) type debt are commonly paying finance charges of up to 157% a year. Invariably, this often forces people to take on more debt to finance the older debt. The majority of debt still consists of micro loans and retail debt (store cards), but increasingly people earning less than R12 000 a month are also falling into the overdraft and credit card trap. Mametse outlines the help offered by The Careways Group telecare counselors when approached by workshop participants suffering from negative cash flow: Analyse living expenses Reduce “don’t have to have” costs Challenge lenders guilty of reckless lending Negotiate with lenders reduced installments Create a personal budget and a financial plan Follow up within four to six months Mametse says the telecare counselors have a very high success rate in helping people turnaround their financial situation. Statistics on the LOA’s Financial Wellness Programme for government employees: Number of workshops delivered: 155 Number of public servants trained: 2 596 Telecare sessions: 143 (76% related to over indebtedness, 20% related to black listing and debt, 4% related to other financial queries) Ongoing LOA consumer education efforts In addition to the focus on lower income consumers, the LOA produces regular consumer advice articles on issues that have been identified by the LOA Consumer Affairs Committee, the Long-term Insurance Ombudsman's office or the LOA office as areas where consumers may need generic advice or guidance. Mametse says the LOA is also currently working on specific consumer education programmes to be launched later this year and early next year focusing on the following issues: What the Statement of Intent means for you. A R2-million budget has been set aside for this. An ongoing jargon buster programme explaining terminology and processes used by new generation risk products. What to look for in the life industry’s FSC Access "CAT" standard products (offering fair Charges, easy Access, decent Terms) for low income households. Ends The LOA is the trade association for South Africa’s long-term insurance industry. Its 36 member companies provide over 95% of the insurance business in South Africa and its members administer assets in excess of R1 000 billion. The LOA represents insurance companies to the Government, Parliament, and to the regulatory and other agencies, and is an influential voice on public policy and financial services issues. The LOA also plays a self-regulatory role as far as the long-term insurance industry is concerned by way of the LOA Code of Conduct which can be accessed via the LOA website at www.loa.co.za.