Debt counselling is one of the available debt relief measures in South Africa provided for in the National Credit Act.
This process is intended to assist over-indebted consumers struggling with debt, through budget advice, negotiation with credit providers for reduced payments and restructuring of debts.
What is over-indebtedness?
A consumer is over-indebted if he/she cannot service his/her debts in a timely manner as agreed with the creditors.
The following are some of the indicators of over-indebtedness:
You borrow money to pay other debts;
You use your credit card and overdraft facilities to pay debts; buy food and other necessities;
You skip payments on some accounts in order to pay others;
You receive letters of demands and summonses from creditors and/or lawyers;
You have judgments granted against you.
Who can apply for debt counselling?
Consumers who are struggling to meet their monthly debt obligation qualify to apply for debt review.
These consumers should have a distributable income, which will be used to offer reduced payments to your creditors.
Consumers married in community of property will have to both apply for debt counselling.
Who performs debt counselling?
Debt counselling service is offered by debt counsellors registered with the National Credit Regulator (NCR).
Prior to registration, debt counsellors (DCs) have to successfully complete a debt counsellor training course, satisfy prescribed education, experience or competency requirements and display ability to manage their own finances.
Consumers can identify debt counsellors by checking the registration certificate which will indicate the debt counsellors name, surname, id number and the registration number as well as a window decal with NCR logo.
Consumers are welcome to verify eligibility of these debt counsellors with the NCR.
Are there any applicable fees?
The NCR debt counselling fee guideline is obtainable from www.ncr.org.za alternatively through the NCR contact centre.
Who is responsible for payment distributions to credit providers?
The National Credit Regulator has accredited four Payment Distribution Agencies (PDAs) tasked with the collection of consumer monies and distribution of these monies to the creditors.
We currently have four accredited PDA’s namely, DC Partner, Hyphen Technology (Pty) Ltd, Consumer Protection Excellence and National Payment Distribution Agency.
Debt Counsellors are prohibited from collecting and distributing debt review funds to creditors.
What are the rights and responsibilities of consumers before and after debt counselling application?
Consumers have a right to apply for debt counselling;
Consumers have a responsibility to ensure full and correct disclosure at time of application;
Consumers have a right to be provided with reasons if the application is rejected;
Consumers have a right to written disclosure of fees applicable on application of debt counselling;
Consumers have the responsibility to follow up on monthly payments made to the PDAs;
Consumers have a right to receive distribution statements from their DCs and PDAs on a monthly basis;
Consumers have a duty to ensure that they understand the process, applicable fees and implications; when in doubt please contact the NCR for verification;
Consumers have a right to negotiate first with their credit providers and if they fail to reach a consensus, they can approach a debt counsellor; consensus, they can approach a debt counsellor;
Tips for consumers on debt management and debt review
Bad decisions are made during good times, avoid being carried away;
Be proactive, there is help when the lights indicate danger, do not wait till it’s too late;
When a demand letter (Section 129) has been issued, the credit agreement will not be included under credit agreement;
You cannot apply for further credit whilst under debt review;
Your credit bureau profile will display a debt counselling flag until clearance certificate is issued;
Do not ignore your creditors, reduced payment is better than nothing at all;
If your circumstances change, please notify your debt counsellor;
If you cannot get hold of your DC, please contact NCR immediately for a follow up;
If things are bad, then it’s time to go on a financial diet;
If you fail to plan, you are planning to fail; (Always budget and stick to it)
Where possible, do not borrow, downgrade and cut out those things that you do not need.
SAVE, SAVE, SAVE, SAVE for rainy days.
Consumers Beware:
Only make use of registered debt counsellors
Ensure that all processes and fees are explained upfront (this includes implications and your rights and responsibilities as a consumer)