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.

2.  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.

3. 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.

4. 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.

5. Are there any applicable fees?

• The NCR debt counselling fee guideline is obtainable from www.ncr.org.za alternatively through the NCR contact centre.

6. 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.

7. 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;

8. 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.