Black Friday warning to those South Africans in debt

South Africans have been warned against falling into debt traps during Black Friday, with the National Financial Ombud (NFO) cautioning shoppers that seemingly attractive discounts could end up costing thousands of rand more when purchases are financed on credit.

With Black Friday falling on Friday, 27 November, retailers are preparing to offer major discounts, limited-time promotions and flexible payment options.

However, the NFO is urging consumers to look beyond the advertised prices and consider the long-term financial implications of buying on credit.

Nerosha Maseti, Banking and Credit Lead Ombud at the NFO, warned that the true cost of credit purchases is often not immediately apparent.

“A discount may reduce the purchase price, but financing that purchase creates an obligation that continues long after the sale has ended,” Maseti said.

Consumers should consider not only how much they save at the time of purchase, but also how much they will ultimately repay and whether the instalments will affect their ability to meet other financial commitments.

A R6 000 purchase could cost R8 400

The NFO highlighted how seemingly manageable monthly instalments can disguise the true cost of borrowing.

For example, financing a product priced at R6 000 over 24 months at R350 per month would result in a total repayment of R8 400.

That means the consumer would pay R2 400 more than the original purchase price – an additional 40%.

The difference illustrates why shoppers should compare the total repayment amount rather than focusing exclusively on monthly instalments.

Maseti warned that an instalment might appear affordable on its own but become considerably more difficult to manage when combined with existing loans, household expenses and other financial obligations.

Buy now, pay later could create another debt trap

The NFO is also anticipating increased interest in Buy Now, Pay Later (BNPL) arrangements during this year’s Black Friday promotions.

While some BNPL services allow consumers to spread payments without interest, the convenience of deferred payments could encourage shoppers to make multiple purchases without considering their combined financial impact.

For example, four separate purchases requiring monthly repayments of R500 each would create a combined monthly obligation of R2 000.

Maseti warned that consumers should remember that all repayments ultimately come from the same household income.

The NFO also reminded consumers that being approved for credit does not necessarily mean they can comfortably afford it.

Under the National Credit Act, credit providers are required to conduct affordability assessments, but consumers must also take responsibility for evaluating whether repayments are sustainable.

Returning defective goods bought on credit

Another potential complication involves products purchased on credit that are defective, not delivered or subsequently returned.

Under Sections 55 and 56 of the Consumer Protection Act, consumers generally have the right to return defective goods within six months for a repair, replacement or refund, subject to the applicable provisions.

However, returning an item to a retailer does not automatically cancel a separate credit agreement.

The NFO warned that consumers sometimes mistakenly assume that returning a product immediately ends their repayment obligations.

The outcome depends on the financing arrangement, the circumstances surrounding the return and the applicable law.

Consumers are therefore advised to notify their credit provider immediately, obtain written confirmation of any refund from the retailer and check that the outstanding loan balance has been adjusted correctly.

NFO’s advice for Black Friday shoppers

To avoid unnecessary debt during the Black Friday shopping period, the NFO has issued several recommendations:

• Compare the total cost: Establish the full amount repayable, including interest, administration fees and insurance.
• Set a spending limit: Ensure purchases do not compromise essential household expenses.
• Calculate existing debt: Include personal loans, store accounts and Buy Now, Pay Later instalments when assessing affordability.
• Avoid promotional pressure: Do not allow limited-time offers to dictate long-term financial decisions.
• Understand the agreement: Read repayment terms, additional charges, cancellation provisions and the consequences of default.
• Keep proof of purchases: Retain receipts, credit agreements, repayment schedules and refund confirmations.
• Act quickly when problems arise: Contact the retailer and credit provider and ensure that refunds or account adjustments are correctly processed.

Where can consumers lodge credit complaints?

The NFO says consumers experiencing difficulties with participating non-bank credit providers should first attempt to resolve complaints directly with the relevant institution.

If the matter remains unresolved, the NFO’s Banking and Credit Division may consider qualifying complaints involving disputed balances, incorrect account adjustments, interest and charges, credit bureau reporting and other credit agreement disputes and fraud.

Consumers can contact the National Financial Ombud on 0860 800 900 or email info@nfosa.co.za.

Its website is www.nfosa.co.za.

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