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Debt counselling explained

  1. What is debt counselling?
  • 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.
  1.  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.
  1. 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.
  1. 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.
  1. Are there any applicable fees?
  • The NCR debt counselling fee guideline is obtainable from www.ncr.org.za alternatively through the NCR contact centre.
  1. 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.
  1. 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;
  1. 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)
  • Money should not be paid to debt counsellors
  • Money should be distributed through a PDA
  • Legal fees can be negotiated.