The Credit Association of South Africa (CASA) has signalled deep concern about the growing rise in illegal lending, warning that increasing financial pressure on consumers and tightening access to formal credit are driving more South Africans into the unregulated credit market.
This warning follows the release of the latest Q4 2025 Credit Stress Report, which highlights a sharp deterioration in consumer financial health.
According to the report:
- Over 40% of credit-active consumers are in default
- Total overdue balances have increased significantly, and
- A growing number of consumers are struggling to meet their financial obligations.
At the same time, industry data shows that a significant portion of credit applications are being declined, as affordability pressures intensify.
A growing shift toward informal lending
CASA CEO, Leonie van Pletzen, says these trends are creating a dangerous shift in the credit landscape.
“Consumers do not stop needing credit when they are declined, they simply look elsewhere. What we are seeing now is a growing migration from the regulated credit market into illegal and informal lending.”
Illegal lenders, often operating outside of any regulatory framework, typically:
- Do not conduct affordability assessments,
- Charge excessive and unregulated interest rates, and
- Employ harmful or coercive collection practices.
“This creates a parallel credit system that operates completely outside consumer protection mechanisms,” van Pletzen adds.
Credit increasingly used for essential needs
The data further shows that many South Africans are increasingly using credit to cover essential living expenses such as food, transport, and utilities, rather than discretionary spending.
“Credit is no longer a convenience, it has in fact become a necessity for many households,” warns van Pletzen. “Unfortunately, when consumers are excluded from formal credit, they are not protected, they are exposed.”
The risk of over-regulation
Van Pletzen cautions that well-intentioned regulatory constraints, including outdated pricing structures and increasing compliance costs, may unintentionally contribute to financial exclusion.
“Exclusion does not equal protection,” she explains. “If regulated credit becomes unsustainable or inaccessible, illegal lending becomes inevitable.”
CASA emphasises the need for a balanced regulatory framework that:
- Ensures strong consumer protection,
- Maintains access to responsible, regulated credit, and
- Prevents the expansion of illegal lending markets.
A call for urgent action
CASA is calling for urgent collaboration between regulators, policymakers, and industry stakeholders to address the growing risk.
Key focus areas include:
- Updating regulatory frameworks to reflect current economic realities,
- Strengthening enforcement against illegal lending practices, and
- Promoting financial inclusion through sustainable, compliant credit provision.
Protecting Consumers Through Access
“As an industry, we must ensure that consumers have access to safe, regulated credit,” concludes van Pletzen. “Because when the formal system fails to meet demand, the informal system steps in, and that is where the real risk lies.”
