Debtfree Magazine issue #11 of 2020 by Debtfree Magazine

Issue 11 of 2020

EXCELLENCE IS DOING ORDINARY THINGS EXTRAORDINARILY WELL â&#x20AC;&#x201C; John W. Gardner

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FROM THE EDITOR I donâ&#x20AC;&#x2122;t know about you but I am mentally fatigued. Admittedly, it has been a real rollercoaster of a year and we are suddenly only a few weeks from 2021 (when did that happen?). With the constant stream of new 2020 catastrophes and constant bad news my brain has started to feel like mush most of the time. I hear I am not the only one. You too may be feeling like 2020 is taking both too long to finish and has simultaneously flown by in a blur. Maybe, like me, you feel your output is lower than ever and you feel like you are working through brain fog, just going about your daily routine on autopilot. Thatâ&#x20AC;&#x2122;s why the fact that it is suddenly almost the end of the year is a real wakeup call. If you are going to successfully make it through December and January then you need to make sure you are ready now. The end of the year is tricky and this year will no doubt be trickier than most with our severely constrained budgets. Be sure to have a look for our reminder article on the topic. It is one of several articles this issue with its, tongue in cheek, Black Friday cover.

This issue we discuss why people seem so desperate in 2020 to hop on the Black Friday train. I mean even my local grocery store is trying to convince me that they have the best toothbrush deals for me and they are competing with airlines who think I am insane enough to hop on a plane and be around other people I donâ&#x20AC;&#x2122;t even know (nice try lunatics). It seems everyone is desperate to squeeze money from the very dry stone that is my wallet this year. Oh wait, thatâ&#x20AC;&#x2122;s because they are. We delve into the growing hysteria surrounding and the origins of Black Friday. If you have been wondering how the Pandemic has hit the debt counselling profession and industry then you will no doubt enjoy our look at that in this issue. The results have not been exactly what you might think and the effects will be felt for some time to come. We also feature news, reviews, tips, advice and all the usual. We all managed to get our brains in gear long enough to help get this issue together for your reading education and pleasure. We do really hope that you enjoy it. We truly hope that the magazine helps you know that you are not alone in your tough journey through 2020 and that even though things are rough, others, just like you, are slowly but surely paying off their debt and getting their lives back on track. It can be done. When you think back to 2020 you will no doubt remember what a crazy year it was but hopefully you will not be just remembering your debts. You will hopefully be thinking about other more important things like spending lots of time with your family, like how you developed new skills, like how much you enjoyed going to work in your slippers. These small positive things have become our daily motivators that help carry us through the brain fog, through the fatigue, through the bad news, onwards another day, another week, another month on our journey to finally being debt free.

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ITâ&#x20AC;&#x2122;S BLACK FRIDAY

2021 PANDEMIC V.2

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COVID-19 EFFECTS ON THE DEBT REVIEW INDUSTRY

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C O N T E N T S

BREAKING NEWS

REPO RATE STAYS UNCHANGED The SA Reserve Bankâ&#x20AC;&#x2122;s Monetary Policy Committee (MPC) has announced that the Repo Rate will remain unchanged at the very low rate of 3.5%. Adjusting the rate is often linked with inflation and those figures are pretty consistent and manageable recently. The Pandemicâ&#x20AC;&#x2122;s effect on the economy was one factor considered as was the confusion and ongoing comedy show that is the USA democratic process (which is now resolving) and its effect on the Rand/Dollar exchange rate. With lockdown levels remaining low and most businesses functioning as well as can be expected, the MPC decided to keep the rate as is.

AFRICAN BANK STAFF CUTS COMING? Due to the effects of the pandemic African Bank are one of the latest businesses looking to cut overheads. At present African Bank has around 3700 employees and have said they may have to cut 317 staff members. The bank reported a 25% reduction in debt collections this year. The bank recently employed 29 new staff who specialize in improving the use of digital solutions and their digital banking products and services.

NCR TARGET MISLEADING ADVERTS Some Debt Counsellors make use of external marketing people or companies that specialize in finding potential client leads. These companies may be making unrealistic or misleading promises to entice people into contemplating debt review. The National Credit Regulator (NCR) has released a circular this year on the topic and cited specific examples of what they label as misleading advertising, saying that such adverts may be leading the industry into disrepute (for which Debt Counsellors can lose their registration) Some misleading examples mentioned in the circular are: There is a new High Court ruling helping people in debt write off up to 63% of their monthly payments. Click “Apply Now” to take the FREE assessment; NCR DC is giving South Africans “Extra Cash” to enjoy by reducing debt interest and protection from repossession of assets. Free assessment sms “YES”; Other attorneys or companies are falsely offering to remove consumers debt review listings at the credit bureaus (before they have paid up all their debt as required) with adverts such as this: We will attend to your legal and debt review flag removal in 20 working days with or without a court order. The NCR warn consumers not to fall for such unrealistic promises and Debt Counsellors to avoid such advertising. Debt Counsellors are urged to contact the NCR to report anyone making such misleading advertising claims.

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EDCON ACCOUNTS: NIMBLE OR CONSUMER FRIEND? Consumer Friend have been handling debt review matters for many (RCS) Edcon matters for some time now. The recent sale of another portion of Edcon’s debtors book to a different company has caused some confusion. When Consumer Friend first took over debt review matters for Edcon debts that were sold to RCS (their client) it took Debt Counsellors a while to double check if their clients’ matters were affected. Consumer Friend was very proactive in contacting Debt Counsellors to confirm the change. Now, the Nimble group have taken on another small portion of Edcon’s debtors book and have been sending correspondence to Debt Counsellors saying they are handling Edcon debts. While they have indeed taken on some accounts it is not all Edcon accounts and Debt Counsellors are urged to check with both Nimble and Consumer Friend to confirm who should receive payments for their clients’ debts with Edcon if they receive a notification. This will help avoid any incorrect payments.

ITâ&#x20AC;&#x2122;S BLACK FRIDAY!!!

ITâ&#x20AC;&#x2122;S BLACK FRIDAY

INTRODUCTION If you work in retail, you are probably doing a Black Friday special just like everyone else. Everyone is pretty desperate this year to try to get customers to spend the little money they have left at their shop, in a last ditch effort to try make up for lost income during lockdown. For many who are looking for a good bargain to help lift the mood of the entire Covid-19 filled year, Black Friday seems more important in 2020 than ever before. What are its origins, and why has it spread worldwide?

IT’S BLACK FRIDAY

THE FIRST BLACK FRIDAY WASN’T ABOUT SHOPPING Interestingly, the term ‘Black Friday’ was first used in 1869, when two greedy stock market gold traders colluded to drive up the gold price by creating a false spike in the price. They bought up every share they could get their hands on, with the intention of selling their shares to other traders following suit, at a huge profit for themselves. Unfortunately their plan brutally backfired, and the stock market went into free fall, leaving countless stock market investors and listed companies destitute. This is why that Friday was known as a very dark or “black” day for the markets, and all the people who lost their life savings and investments as it collapsed. Sadly, over 150 years later we still see similar attempts at market manipulation and as recent as this year big banks have been caught out and have had to pay record high fines for trying these profit making tricks.

IT’S BLACK FRIDAY

SO, WHERE DID THE MODERN BLACK FRIDAY COME FROM? Stores create a themed shopping experience to take advantage of the annual festivals and holidays. You have probably noticed that most shops are already playing Christmas songs, even though it is still weeks and weeks away. Soon every holiday began to get their own decorations, signage and even theme music. Shoppers get bored and changing things up within your shop from time to time, has shown to improve sales. It also sometimes feels like the shop owners and their staff are bored, and also need a change. In Philadelphia (USA) in the 1950s the police used to talk about the chaos that used to happen on the day after Thanksgiving, when people from the suburbs and tourists used to come into the city to watch a big American gridiron football game the following day. All the cops would have to be on duty, and work many hours of overtime just to handle all the extra incidents and problems on that Friday. Shoplifters in particular used to be a big problem on the day, since the shops were so crowded with people. The cops didn’t like it and so gave it this negative name. By the 60’s most Philadelphia shops began to use the term (or the similar name: Big Friday) to refer to this challenging retail day.

ITâ&#x20AC;&#x2122;S BLACK FRIDAY

WHAT IF YOU HAD A SORT OF HOLIDAY ALL ABOUT SHOPPING?

By the 1980’s many local Philadelphia shops had decided that having lots of people in the store on that particular day was actually a great earning opportunity, and not a big pain. Many shops ran at breakeven (or a loss) all year until this big day in November, when they finally began to see some profit for the year. They would finally go from being “in the red” (and accounting term for making a loss) to being “in the black” (or making a profit). This was, for retailers, something to celebrate - a type of shopping holiday. Soon stores began to compete in offering sales items to attract the most customers. The idea was have some really cheap items on sale, and then hopefully the shoppers would buy other normal priced items as well (a classic marketing idea). Around the mid 1980’s stores country-wide in the US caught on to the trend, and began to replicate it. They also, with some clever marketing, began to see a massive increase in sales on that Friday. Then it became a war of advertising and offering lower and lower prices to try draw customers in. This is how the modern Black Friday, with all its craziness became a thing. We have all seen the videos of old ladies punching kids in the face as they wrestle a special toy from their hands among other such crazy stuff. It is often funny to see, but there is a bit of a dark side too. Sadly, some people have even lost their lives in all the hysteria. Over the next few decades, Black Friday slowly spread worldwide as other countries and shops desperately wanted to cash in on the phenomenon. The trick was to try create a feeling of excitement and anticipation and attract people into the stores. This is where FOMO comes in.

IT’S BLACK FRIDAY

WHAT IS FOMO? The Fear of Missing Out, also known as FOMO, is a basic human condition. We hate being the last to know, not being invited somewhere or missing out on the latest gossip. This is what drives, among other things, our love of news and social media. In modern times it was the Americans who first realized how important it is to not only take advantage of FOMO, but also how to generate a feeling of hysteria when shopping and how this spikes sale figures. Marketing agencies worldwide learnt from them, and now make use of advertising to generate hype leading up to the event. They now create countdowns; get people to sign up to ‘early access’ daily mailing lists or emails to get people excited. The message is, if you don’t buy now, you are going to miss out!

IT’S BLACK FRIDAY

BLACK FRIDAY MONTH, CYBER MONDAY & TECH TUESDAY The next logical step after creating hype about a single day of shopping is to try to create another day or even two to try to draw in shoppers again. This was the idea behind cyber Monday or tech Tuesday as shops selling computers and phones began to punt this separately branded event. In an attempt to get people to ring fence some of their money for particular products these other tech based sales days have sprung up and have been increasing in popularity But competition for people’s limited funds is tough, and location based retailers now have to compete with online shops with lower over-heads. As competition hots up, to gain attention sooner than their competitors, retailers started advertising a ‘Black Friday week’, then a Black Friday month, next they may have to have sales every single day…oh wait… they already do.

ITâ&#x20AC;&#x2122;S BLACK FRIDAY

BUYING ON CREDIT The questions of how to push sales even higher on these new shopping holidays was quickly answered with the wide availability of credit from the banks and then later the retailers themselves. The stores purchase heavily discounted mass stock from desperate suppliers, sell these items cheap and the consumers make use of credit in order to not miss out. Of course, the consumers often ignore the fact that buying anything on credit, eventually costs you much more than the advertised price. But FOMO combined with (the learned behavior of) wanting instant gratification continues to drive credit use among shoppers. So, consumers end up paying more by using credit in order to save. Oh the bitter irony!! All we can say is, well done marketing people!

IT’S BLACK FRIDAY

DON’T GET SWEPT UP IN THE HYSTERIA We all love a good bargain. Finding something cheaper at one shop than somewhere else is smart. Shopping around for deals, on items you need, is actually a really good idea. The trick is to not fall for the obvious marketing ploys of clever advertising people and shop when you don’t need to, or can’t afford to. The fear of missing out is a real marketing strategy that drives people to make bad snap decisions based on a false sense of urgency. It is much better to budget, save, and only buy what you need when you need it. This doesn’t mean that you should avoid Black Friday, after all there may be a deal on a specific item you are looking for. What it does mean, is that you need to be careful of not getting swept up in the hysteria of the day. The National Credit Regulator have even sent out media blasts warning people not to get carried away on Black Friday, and to avoid buying on credit. Debt Counsellors country wide are similarly cautioning their clients, urging consumers to be smart this year and only buy what they need, if they have saved for it.

IT’S BLACK FRIDAY

LOOKING FOR THE BEST BLACK FRIDAY DEAL? Our cover this month is very tongue in cheek, as we try to highlight how just slapping the words ‘Black Friday’ on anything can easily be done and create a clever marketing impression. Please use common sense this month and shop wisely. Still, we want to live up to our cover so, here is a Black Friday special that might be hard to beat: Debtfree Magazine is not 50% off, not 75% off, it is 100% off this month… and next month and every month, enjoy!

DEBT REVIEW LESSON 1

Missing a payment while in debt review can make you lose all the progress you have made over months or years. Never miss a payment.

PANDEM

MIC V.2

PANDEMIC V.2

WHAT TO EXPECT NEXT YEAR When South Africa entered the initial 2 week lockdown at the end of April 2020, many people thought the Covid-19 pandemic would be nipped in the bud and life would quickly go back to normal. Scientists and economists, of course, were warning that the new virus was here to stay and that the world was in for a long, hard time fighting the illness. Now, as we are nearing the end of 2020, we look ahead to 2021 and wonder what it will hold. Here is a quick look at 4 things you can expect in 2021

PANDEMIC V.2

1. THE 2 WAVE ND

Back in 1918 & 1919 it was the second wave of Spanish Flu that took the most lives, not the initial outbreak. At present, Europe has been hard hit by their second wave (a wave caused primarily due to human behavior). As winter hit the northern hemisphere transmission rates increased and sadly, so have infection and death rates. While South Africa is currently enjoying a nice warm summer, which helps as it encourages people to increase ventilation etc. Winter will eventually roll around again. It remains to be seen what impact this has, but it is anticipated that rates will climb as winter begins. Another factor in the spread of the virus, is non-essential social contact with infected people. With a December break coming for most people, and with many planning to visit family and friends over this time, we can predict infection numbers to climb swiftly. Those returning from family and friends in other provinces are expected to spread the virus back home when they return, especially when using public transport.

PANDEMIC V.2

2. VACCINES It seems that every country is developing their own vaccine. Never before has there been as strong a financial and political drive to develop some sort of treatment (almost any type of treatment) for a flu virus. 2021 will see the production of many different and competing vaccines, all with different pros and cons. The pharmaceutical companies who have a vaccine in the works have pre-sold 90% or more of what they will be able to produce next year to 1st world countries. For 3rd world countries, like SA, it will be a case of (1) who will sell us vaccines, and (2) can we safely store and distribute the vaccine (some require staying at minus 80 degrees at all times)? Even when a vaccine/ vaccines comes to SA, the question is, who gets it first (will it be doctors and children for example or the politicians and rich people). Will rich people be able to privately buy the vaccine through their medical aid or private hospital? Time will tell, but history tells us that those with money tend to come off best during pandemics. We may see a repeat of this trend in 2021. Since vaccine production has been rushed through, so many people will be hesitant to take it. Already many people have become anti vaccine over the years and others will simply want to be cautious and wait for others to take it first so they can see if there will be negative long term effects. So, you may have a divide among those who want it and those who refuse. This is a complex issue. It may be that the vaccine(s) are only effective for a short time period, or that Covid-19 may mutate over time and eventually pharmaceutical firms will need to develop and sell a new annual vaccine, similar to what currently happens with flu shots. It is good money for them, if that is how it plays out and deals with the reality that Covid-19 may simply be around for the foreseeable future, spiking in the population every winter for years to come.

PANDEMIC V.2

3. ECONOMIC FALL OUT Millions of South Africans lost their jobs in 2020 due to the lockdown, and resultant economic collapse. People shifted their shopping habits which massively impacted on many businesses (like restaurants who had to close or shift to take-out options). Not to mention people without income simply had no money to spend, which meant many businesses suddenly had no one coming to buy things. This in turn meant they could not pay staff or their suppliers. Economic recovery in the wake of a Pandemic will be a long time in the making. Some people blame the economic impact of World War 1 and the pandemic that followed in 1918 for the eventual rise of Fascism and the Nazi party two decades later, in a still impoverished Europe. We can expect the Rand value to come under increased pressure based on National debt levels. This makes imported items more expensive and exporting items more desirable. Locally, government is planning on creating lots of jobs in the months ahead. However, itâ&#x20AC;&#x2122;s worthwhile realizing that job creation is always on the political agenda, and has been for many decades now. So has housing and providing electricity and good plumbing. There is a massive need right now, and similar job programs were successfully used in the past, in many countries, to stave off mass starvation and homelessness. Many businesses will continue to look for ways to cut costs and even reduce staff overheads by turning to technology and outsourcing. For some, this means new opportunities, but for others the loss of past income. Adaptability and creativity will be key to survival.

PANDEMIC V.2

4. SOCIAL CHANGE Already we have seen how a large number people have decided not to protect others, by simply wearing their facemasks. This may relate to inconvenience, frustration and inconsiderateness or may be a result of isolated for prolonged periods of time. There seems to be a worldwide tendency towards selfish behavior, which is not new, but has recently become more apparent. During lockdown, the clear connection between alcohol abuse and domestic violence was highlighted as families were confined to their homes, with tensions running high. Many people realized they might like to have a larger home with faster internet access. A lack of sympathy or empathy is a dangerous thing in the long run. It creates negative social behavior resulting in crime and xenophobia. As already mentioned, economic pressure often drives people to pretty extreme views and attitudes. In Germany and Italy in the 1930â&#x20AC;&#x2122;s, a common idea was that people who were of different religious or ethnic backgrounds were to blame for all the problems in those countries at the time (typical xenophobia). It saw the rise of extreme political leaders and views, which ironically coincided with the economic recovery in those countries as they entered a war footing. Will we see similar attitudes and developments locally or even worldwide? Time will tell. Social distancing is not a natural state for people, and many people have been suffering from depression and anxiety due the pandemic. As money gets tighter, and more people plunge into debt to survive, we can expect to see these issues become more common as we approach the second year of the â&#x20AC;&#x2DC;pressure cookerâ&#x20AC;&#x2122; that is this Covid-19 Pandemic.

PANDEMIC V.2

READY OR NOT 2021 HERE WE COME For many, crossing the physiological barrier of 1st Jan 2021 will create a huge sense of relief and hopefulness. There will no doubt be many other developments in regard to technology and finance as 2021 unfolds. Letâ&#x20AC;&#x2122;s hope that most of them will be positive and improve our lives. Another trend we will hopefully see next year, is more people turning to debt review as a way to deal with the financial pressure they face. It certainly offers a more manageable way for consumers to deal with their debts. If you have been taking financial strain and are looking for help, why not talk to a NCR registered professional Debt Counsellor about your current situation? What remains to be seen is how credit providers, who themselves are under increasing pressure to recover from the lost revenue of the lockdown and economic crash, react. Will we see credit providers make wider and longer lasting concessions on top of those they already have been making to the industry or will we see collections pressure from above start to create a more antagonistic attitude in the industry? We can hope for the former while not being surprised by the later, if it happens. As always it will be up to the big banks to take the lead in this regard. After a very tough and scary year, the good news is that 2021 is coming whether we want it or not. The bad news is that itâ&#x20AC;&#x2122;s coming whether we are ready for it or not.

DEBT REVIEW LESSON 2

Having financial challenges this month or next? Why not talk to your Debt Counsellor today about the situation and see if they have advice for you?

INSURANCE DO YOU NEED IT? You never need it...until you need it, thatâ&#x20AC;&#x2122;s the nature of insurance. In fact, you hope to never have to claim on your insurance ever - regardless if that is your car, house, credit and especially your life insurance.

INSURANCE DO YOU NEED IT?

WHEN DISASTER STRIKES Insurance plays an important role in managing unexpected or undesired situations. In most cases, it will not replace the entire financial burden, but it will certainly help you manage the worst of whatever disaster has come your way. Some policies even have the option for you to pay more monthly and avoid any excess payments

INSURANCE DO YOU NEED IT?

INSURANCE ON YOUR CREDIT Did you know that when you applied for credit, you were asked by your credit provider to take â&#x20AC;&#x2DC;required credit life insuranceâ&#x20AC;&#x2122; in case of your death or incapacitation? These insurance policies protect the credit provider in case of your death. These policies also protect you, and can help cover installments on your debt (in many cases for several months) should you lose your job or become unable to earn.

INSURANCE DO YOU NEED IT?

COVID-19 & LOCKDOWN Many consumers were relieved when they were able to claim against such insurance during the national lockdown. Many businesses also made claims against business interruption. While some insurers said that Covid-19 was a new illness and could not have been predicted, (and allowed for in their policies) the courts in SA and elsewhere have disagreed, and recent landmark cases have seen businesses win their cases and receive much needed insurance pay-outs.

INSURANCE DO YOU NEED IT?

SPECIAL INSURANCE FOR THOSE IN DEBT REVIEW Even those under debt review can benefit from insurance (worked into your monthly budget by your Debt Counsellor). Besides the â&#x20AC;&#x153;usualâ&#x20AC;? insurance options, that help consumers, those in debt review can opt for competitively priced insurance products to cover their credit accounts, and even their monthly debt review payment obligations. Example: What happens if you have a car accident while in debt review and your car is written off? Since consumers in debt review do not get access to new credit, how do they organize to get a replacement car to drive for work? There are insurance options for that. Example: What happens if another wave of Covid-19 forces everyone into another hard lockdown in 2021, preventing you from earning an income and have no money available for rent or your debt review payment? Fortunately, there are available insurance options for that. If you do own a car, make sure that your (required) insurance policy is up to date, and your insurer is aware of your debt review and any other relevant details, like where you live and park the car, never hide information from the insurer.

INSURANCE DO YOU NEED IT?

GET ADVICE Speak to a FAIS advisor (or ask your Debt Counsellor to put you in touch with one) about the various insurance options available specifically to people in debt review, which hopefully you never need to claim against.

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Temporary Disability *

Maternity *

The CreditGuard Credit Life Insurance Policy is underwritten by Guardrisk Life Limited (FSP 76) and administrated by Siyavika Risk Solutions (FSP 44999). CreditGuard is brought to you by Emisha Software (PTY) Ltd | 2016/281371/07

Identity Theft **

Critical Illness *

PREPARE NOW With the end of the year fast approaching it is wise to start thinking about the typically financially tough months of December and January. With the lockdown earlier in the year and how things have been going it is only realistic to be thankful for having work and income. Dreams of a bonus have long since faded and just the fact that your boss may give you a few days off at the end of the year is something to be celebrated.

PREPARE NOW

DECEMBER HOLIDAYS The end of the year is traditionally a time when families get together and spend time enjoying one anotherâ&#x20AC;&#x2122;s company, often with gift giving and big meals and added costs. Despite the pandemic many people will be travelling to spend time with family this will mean added expenses and in some cases unrealistic expectations from family and friends (regarding bringing of gifts). If you expect to take a break and travel or give gifts at the end of the year then be sure that you have budgeted for these extra costs. If money is tight after a tough year of lockdown then now might be a good time to have an honest conversation with your family (either at home or those who expect you to visit and bring gifts) to help manage expectations.

PREPARE NOW

JANUARY 2021 We are all looking forward to a new year ( hopefully a better one) but January can bring with it its challenges. For parents, for example, it can mean new school uniforms, new books and additional costs. If you have not been able to set funds aside according to your planned monthly budget from your Debt Counsellor (after all lockdown made a joke of most of our plans) then you may now want to cut as many costs over Black Friday and Christmas holiday season as possible. Talk to your family about what these cuts may look like and how everyone can contribute to cutting back on spending. Preparing now can help reduce your stress later. Particularly is this applicable for those who no longer can access more credit (like those under debt review). Be sure to rope the whole family into helping cut back on expenses and talk about being realistic of what they can expect this year end.

THE EFFECTS OF COVID-19 ON THE DEBT REVIEW INDUSTRY A global pandemic is not going to leave a single industry unaffected. Everyone, everywhere has been impacted by Covid-19 during 2020. For some, this has meant illness or sadly the loss of loved ones, but for the majority of people and businesses the negative impact has been economic. You may wonder how the debt counselling industry has been affected by the Pandemic and subsequent lockdown. Has business been booming or has it dried up?