How do you know if you’ve been advised correctly or if your debt counsellor is competent? While there are many debt advisors out there doing their utmost for their clients, not all can offer the same level of service.
When you are in over your head you may be desperate for advice, but you need to be vigilant too and hire the right person to take care of your finances. Here are nine questions to direct at your debt counsellor to ensure that you get the best advice:
1. How does the debt review process work?
Your debt counsellor should be happy to go through the application process with you, explain how long the process could take, and how much it will cost you.
“They should conduct a full assessment and contact your credit providers to get the most up to date information on your accounts. The debt counsellor will negotiate with the credit providers based on what you can afford and should be on hand to answer any questions. If one or more creditors don’t accept the terms, the matter will then go to court and the debt counsellor should help with this process. Timelines for debt counselling will depend on your levels of debt and affordability but they can last between four and seven years,” said Luke Hirst managing director at debt management service provider DebtBusters.
2. Are you registered and have you signed the industry code of conduct?
Under the National Credit Act (NCA) your counsellor needs to be registered with the National Credit Regulator and be signed up to the industry’s code of conduct. Ask the debt counsellor for their registration number and verify it by phoning the regulator on 0860 627 627.
3. What fees are you going to charge me and are they in line with the NCR’s guidelines?
Your debt counsellor could charge you an application fee, a debt counselling fee (restructuring fee) and a monthly after care fee. The only upfront fee you may be charged is a statutory application fee of R50. If a counsellor finds that you are not in need of debt advice you will be charged a rejection fee of R300, excluding VAT. If they take your case on you will only be obliged to pay the upfront application fee and all other fees are worked into your monthly restructured payment plan.
4. Which payment distribution agency (PDA) do you use?
After your debts have been restructured, debt counsellors are not allowed to pay your creditors on your behalf and have to make use of a PDA. Make sure your debt counsellor’s PDA is accredited by the regulator. Accredited agencies include Consumer Protection Excellence, DC Partner, Hyphen Technology and the National Payment Distribution Agency.
5. Which debt counselling software system do you use?
Counsellors use software systems to evaluate your levels of debt. If they don’t use the correct software the restructured payment plan could end up being inaccurate. If the courts find a flaw in the calculations they may turn down the payment plan proposal and you could be faced with paying loans at a level you can’t afford.
6. Do you adhere to the industry’s task team restructuring rules?
If they adhere to the Debt Counselling Rules System (DCRS), debt counsellors can negotiate more favourable repayment terms thanks to mandates they have with banks and other credit providers signed up with the National Debt Mediation Association (NDMA).
Advisors can, for example, negotiate to have the loan period extended and/or reduce the interest rates so that your repayments are more affordable. But not all lenders and debt counsellors have created joint initiatives under the DCRS system. Around 61% of registered credit providers have signed up to the code of conduct, which allows them to use DCRS, while there are only 37 debt counsellors making use of this system.
7. Are you being investigated by the NCR?
You can find out if your debt counsellor has been struck off the register by asking NCR directly. However, if they are under investigation the NCR will not disclose this as it doesn’t want to compromise any investigations. But there’s nothing to stop you asking your counsellor this question.
8. If I need an attorney how much could I be charged?
There’s always a chance that one of your creditors rejects the debt restructuring plan, which will mean you will have to face them in court. You need to find out from your counsellor if the attorney they recommend is an expert in debt review cases and how much they will charge you. “The cost of the legal process is not regulated and can vary depending on the jurisdiction, number of credit agreements and court dates. Always ask for the charge upfront so you know where you stand and how this will be collected,” added Hirst.
9. Will you be leaving the industry?
There is always a chance that your debt counsellor has handed in their notice and is planning on exiting the industry. Ask if they will conduct a proper handover and get the contact details of whoever will be taking on your case. “Many debt counsellors have left the industry, so always ask how long they’ve been around for, how many employees are involved and what training they have undergone,” said Hirst.