Guiding consumers since 2009

Questions to ask your debt counsellor

By Staff Writer

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.

 

 


 

Recent Articles

Featured What’s the deal with underwriting?

When you apply for a long-term insurance policy, a financial adviser will ask some personal questions about your lifestyle, family history, health, and even ask you to take some medical tests. This process is called underwriting, but is it really necessary?

 

How are you taxed on your retrenchment package?

Unemployment is one of the biggest problems in South Africa. The emergence of the Covid-19 pandemic has exacerbated the situation with a lot of companies retrenching their employees.  When retrenched, you’ll receive a retrenchment package, but do you know how much tax you’re liable for?

Car repossessed – don’t be taken for a ride

When the country is facing an economic downturn, chances are your finances will feel the pinch. This can lead you to make bad financial decisions such as skipping your vehicle payments. But every decision has consequences and if you don’t pay your instalment, the bank will repossess your car. But what can you do when this happens?

 

Why you should consider gap cover

Your medical aid should protect you from incurring large medical bills when you’re sick. But what if your plan doesn’t cover the full cost of your medical expenses? We got in touch with insurance experts to find out whether gap cover is worth having.

Deals

Office furniture at discounted prices at BDK

Price: Available on request
When: Daily
Where: Johannesburg

Da Vincis Happy Hour Special

Price: Available on request
When: Daily
Where: Cape Town

Use your Absa card and get 30% cashback at Dis-chem

Price: Available on request
When: Daily
Where: Nationwide


Latest Guide

Guide to debt rehabilitation solutions