Many South Africans are being pushed into the hands of illegal lenders as financial pressures tighten their grip on families, prompting an urgent warning from the Credit Association of South Africa (CASA).
While registered credit providers must adhere to strict rules under the National Credit Act, including affordability checks and limited fees, unregistered lenders, often known as 'Mashonisa', operate without any oversight, leaving consumers vulnerable to exploitation.
CASA CEO Leonie van Pletzen said the increase in illegal lending was being caused by a significant gap in the credit market.
“When people are denied formal credit, their need for money does not go away, it pushes them towards risky, unregulated options.
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According to Van Pletzen these illegal operators often charge exorbitant interest, demand bank cards or ID documents as collateral, and use intimidation tactics to force repayment.
“Borrowers are left without contracts, legal protections or the ability to build a credit record, often paying far more than the amount they originally borrowed.”
The warning comes as CASA research shows that many rejected credit applicants are increasingly turning to informal lenders, where protections do not exist.
CASA urged consumers to verify lenders through the National Credit Regulator (NCR) and look out for key signs of legitimate providers, such as written agreements, clear fee structures and proper registration.
The organization also stressed that consumer awareness alone will not solve the problem.
“A dual approach is needed, cracking down on illicit lenders while ensuring that regulated credit remains accessible. Financial inclusion and consumer protection must go hand in hand.
“If secure, regulated credit is not available, the illicit market will continue to flourish,” Van Pletzen explained.
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