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Consumers are showing renewed appetite for credit, credit risk solutions company PIC Solutions said on Wednesday.

"And consumer credit organisations are preparing for the economic turnaround," director Simon Trupp said in a statement.

Standard Bank's announcement at the beginning of September that it was introducing an increased risk acceptance rate in its home loans and credit divisions would have a 'significant impact' on the consumer credit industry.

Other banks following suit

Other banks were following with a similar easing up of lending policies. The new policies were being implemented in line with anticipated increased economic activity, he said.

The company noted the credit industry had been predictably affected when the National Credit Act (NCA) became operational in June 2007. This was compounded by the increased debt burden.

"The volume of our collections related work had tripled from early 2008, while the volume of originations related work almost ceased entirely, showing a strong switch in business focus for companies."

There was also a significant slowdown in growth activities in the banks.

Policies directed at the lower end

The new bank policies were being directed at the lower end of the economic spectrum and in particular would benefit first-time entrants into the general credit and housing markets.

"Standard Bank now offers low-risk first-time buyers a 104 percent loan on property up to R1-million and a 100 percent loan on property up to R1.5-million — a marked difference from the previous rigid 90-95 percent," Trupp said.

The bank had also raised the acceptable bad debt ratio for credit cards by three percent on new business in a select segment of entry-level applicants.

Relaxed borrowing also for new customers

"Borrowing criteria which used to exclude new customers have been relaxed to include them," Trupp said.

Financiers believed the economic recovery in South Africa would remain slow. However, there was an improvement in affordability among households, largely due to interest rate cuts since December 2008, favourable projections for further interest rate drops and falling inflation, he said.

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