Don’t let Black Friday cloud your financial judgement – NFO

As Black Friday approaches on 27 November, the National Financial Ombud (NFO) is urging South Africans not to let the excitement of bargain hunting cloud their financial judgement.

While major retailers entice shoppers with eye-catching discounts, limited-time offers, and convenient payment options, the NFO highlighted that buying items on credit can lead to total costs that far exceed advertised sale prices.

Banking and Credit Lead Ombud at the NFO, Nerosha Maseti, emphasised that the true cost of credit purchases is rarely obvious at the cash register.

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

“Consumers should consider not only what they are saving today, but what they will ultimately repay and how that commitment will affect their ability to meet other financial responsibilities,” said Maseti.

It all adds up

The Ombud warned that low monthly instalments can give consumers a false sense of affordability.

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

Once interest, administrative fees and required insurance are factored in, the consumer could end up paying R2 400 or 40% more than the initial sticker price.

Maseti noted that while borrowing is a common mechanism for households managing expenses, it requires clear foresight.

“An instalment may appear affordable in isolation, but once combined with existing loans, household expenses and other obligations, the financial burden may be considerably greater than anticipated,” she warned.

Buy now, pay later

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

Although certain BNPL arrangements allow consumers to spread payments without interest, the convenience of deferred payments may encourage multiple purchases that collectively place pressure on household finances. 

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

“Consumers may regard smaller deferred payments as less significant than traditional loan instalments.

“However, regardless of how a purchase is financed, those payments must ultimately come from the same household income,” Maseti emphasised.

The NFO reminded South Africans that credit approvals, under the National Credit Act 34 of 2005, should not be viewed as confirmation of personal financial health.

“A credit provider’s decision to approve an application should not replace the consumer’s own assessment of whether the repayments are sustainable.

“Responsible borrowing and responsible lending go hand-in-hand. Consumers must provide accurate financial information, while credit providers must comply with their statutory assessment obligations,” Maseti explained.

Beyond affordability, the NFO highlighted the difficulties consumers may encounter when goods purchased on credit are defective, not delivered or returned.

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

However, returning a product to a store does not automatically cancel a separate financing agreement.

“Consumers sometimes assume that returning a product automatically ends the related credit obligation. That is not necessarily the case.

“The position depends on the type of financing arrangement, the circumstances of the return and the applicable law,” Maseti noted.

In such cases, buyers must immediately inform their credit provider, secure written confirmation of any store refund and ensure their loan balance is adjusted accordingly.

Tips for Black Friday shoppers

To avoid long-term debt traps, the NFO advises consumers to follow these essential guidelines:

• Compare the total cost, not only the discount. Establish the full amount repayable, including any interest, fees and insurance payable.
• Set a realistic spending limit. Ensure purchases will not compromise essential household expenses.
• Add up all repayment commitments. Include existing credit agreements, store accounts and BNPL instalments when assessing affordability.
• Resist promotional pressure. A limited-time discount should not determine a long-term financial decision.
• Understand your credit agreement. Review repayment terms, charges, cancellation provisions and the consequences of default.
• Keep proof of purchases and returns. Retain agreements, receipts, repayment schedules and refund confirmations.
• Act promptly when disputes arise. Contact the relevant retailer and credit provider and verify that agreed refunds or adjustments are correctly reflected.

“Consumers experiencing difficulties with participating non-bank credit providers should first attempt to resolve their complaints directly with those institutions.

“Where matters remain 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 aspects of credit agreement disputes and fraud,” the NFO stated.

Contact the NFO at 0860 800 900 or email at info@nfosa.co.za or visit their website at www.nfosa.co.za. – SAnews.gov.za

Source: Original report at SAnews.gov.za.