Nicolette Dirk, finance writer, justmoney.co.za
Nearly 50% of South Africa’s credit active consumers are struggling with debt, and according to statistics released by the National Credit Regulator (NCR), the number of consumers with impaired records increased by 71,000 to 9.76 million up from 9.69 million in the previous quarter.
Paul Slot, president of the Debt Counsellors Association of South Africa, said too much debt, the increase in the cost of expenses and no salary increases is the causes of more consumers getting into debt trouble.
Kedilatile Malakalaka, debt counselling manager at the NCR, said debt review is a good option for people struggling to meet their monthly payments.
“The aim of debt review is to assist over-indebted consumers who are struggling to meet their financial commitments by providing budget advice, negotiating with credit providers for reduced payments, and restructuring debts,” said Malakalaka.
Slot said what makes debt review a good option is that the consumer also enjoys the protection of the National Credit Act (NCA) that prevents credit providers taking legal action against them.
He added that the success rate of debt review is high where consumers under debt review have been paying pack back their lenders R400 million every month.
Access to debt review services
Debt review services are offered by registered debt counsellors. But before signing anything, Malakalaka advises that consumers confirm their debt counsellor’s registration with the NCR.
You can also verify the debt counsellor’s registration by requesting the registration certificate which should have the NCR logo, clearly displayed name, ID number and the NCR registration number of the debt counsellor.
“It is critical for consumers to bear in mind that debt counsellors are not authorised to collect or distribute debt review funds. These funds must be paid to an NCR-accredited Payment Distribution Agency (PDA), and not directly to the debt counsellor”, said Malakalaka.
She added that debt counsellors must also collect their restructuring fees through an accredited PDA she adds. There are currently three NCR accredited PDAs providing payment distribution services, namely DC Partner, Hyphen Technology (Pty) Ltd and the National Payment Distribution Agency.
Your responsibilities under debt review
Malakalaka warned that debt review is not a payment holiday and consumers are still liable to pay their debts at reduced instalments. Consumers should have a distributable income, which will be used to offer reduced payments to credit providers.
Slot added that debt review is not effective when consumers reach out for help too late. These are usually cases where credit providers have already taken legal action and the consumer is then liable to pay the legal costs plus the initial amount owed.
Malakalaka added that for many consumers already in debt, the idea of contracting the services of a debt counsellor may seem prohibitive as there are fees involved.
“However, debt review fees are dependent on the consumer’s disposable income and are capped. This means that consumers do not have to borrow money to pay debt review fees, she said.
The NCR conducts educational workshops to assist consumers to understand their rights and responsibilities on credit. If you wish to attend a workshop, contact the NCR on 0860 627 627. Details of the current fee guidelines can be found at www.ncr.org.za.