Trapped by debt? There is a way out



South Africa’s consumers are feeling the pinch of Covid-19 and the subsequent lockdown - both on their jobs and their income – which has led to some falling behind on their debt and bill payments.

The thought of having debt collectors knocking at your door is a stressful prospect but it doesn’t need to be.

The National Credit Regulator (NCR) says that financial distress can be overcome by debt counselling, but it takes time and effort.

Now that the lockdown is winding down and we’re gradually adjusting to the ‘new normal’, many South Africans face the possibility of being blacklisted.

Households are already facing crippling financial hardship while others aren’t far behind, struggling to make ends meet.

This has been happening even before the pandemic, says Advocate Kedilatile Legodi, NCR acting Manager for Education and Communication.

Debt counselling was first introduced in the National Credit Act (NCA) in 2007 as a debt relief measure to help debt-strapped South Africans struggling to keep up with repayment commitments. Since then, consumers could restructure debts to make the repayment process more manageable.

“Furthermore, the process of debt counselling leads to rehabilitation, as it presents consumers with an opportunity to start afresh and build a clean credit record,” says the regulator.

Debt counselling is useful in that it offers consumers an opportunity to repay their debts, rather than borrowing more money.

Did you know? If you apply for relief intervention before credit providers take legal action against you for the funds, you’ll be protected against such legal action and the repossession of your assets.

Consumers are also protected if they continue to repay their debt while under debt counselling until all debts are paid up.

“Essential/living expenses such as groceries, school fees and others are taken into account before a determination of how much is available to offer towards your debts,” the NCR says.

How debt counselling works

A registered debt counsellor’s job is to negotiate reduced repayments on behalf of their client by taking into account the consumer’s existing income.

The restructuring of debt, according to the National Credit Act, is approved by a Magistrate Court or the National Consumer Tribunal.

This guarantees that the negotiated and restructured repayment plan is fixed for the duration of the client’s debt counselling.

The NCR recaps that there is no limit in terms of the amount of debt that can be placed under debt counselling, if legal action is not taken, the consumer debt can be included under debt counselling.

“There is no time frame for a consumer to be under debt counselling, as the term is dependent on the consumer’s financial circumstances such as debt, income, living expenses and others,” the NCR says.

In the instance that a consumer’s short-term debt is paid in full and the only remaining debt is an up-to-date home loan, the customer is issued with a clearance certificate.

At this point, all credit information of accounts that were previously under debt counselling will be erased from a credit profile/record at the credit bureau, allowing the consumer to start on a clean slate.

Consumers have the option to make a single payment through the Payment Distribution Agents (PDAs) registered with the NCR.

PDAs have an order to collect and distribute debt counselling funds on behalf of consumers to credit providers, making the process more convenient for the consumer.

Legodi says while it may be difficult for many to confront their financial hardship, consumers who are receiving income are encouraged to act immediately by considering debt counselling.

This, he says, intervenes as a relief measure and allays the prospects of assets - such as houses, cars and others - being repossessed by credit providers.

Applying for debt counselling

The NCR says that anyone who is thinking of applying for debt counselling, which is also known as debt review, l must have an income and not be under debt administration at that moment.

NOTE: Once a consumer applies for debt counselling, they will not get any further credit and the person’s name will be flagged at the credit bureaus.

While this is not a listing, it is an indicator that a consumer has applied for debt counselling.

While debt counselling services are not offered for free, the regulator emphasises that costs, which can be confirmed on the NCR website, should be explained to consumers upfront by the debt counsellor.

Where a court order has been granted, says the NCR, consumers can only exit debt counselling upon receipt of a clearance certificate from their debt counsellor.

Also, anyone needing a debt counsellor should use one that is close to where they live or work. This will give them easier access to the service and allow them to physically visit the debt counsellor’s office should they need to.

Legodi emphasised that buyers should make sure that they receive a complete explanation from the debt counsellor and that they understand the process of debt counselling before they sign and accept the application.

Lastly, applicants must also make sure that they have all the necessary information about who their debt counsellor is (i.e. name and NCR registration number), what the consequences of being under debt counselling are, how their debt is going to be restructured, the related costs, and what their rights and obligations are under debt counselling so they can make informed decisions, and stay informed to proactively address any concerns or anomalies they notice.

Do you need help with managing your debt? Apply for debt counselling offered by NCR registered debt counsellors, whose statuses can be verified on the NCR website or by calling on 0860 627 627.


Read Also: