Know your rights and responsibilities under debt review
Just below 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 had increased by 71,000 to 9.76 million up from 9.69 million in the previous quarter.
However, there is help at hand for consumers who are struggling to meet their monthly payments in the form of debt review. “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,” says Kedilatile Malakalaka, manager: Debt Counselling at the NCR.
Debt review services are offered by registered debt counsellors. Malakalaka advised that consumers should confirm their debt counsellor’s registration with the NCR. Consumers 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 should be noted that debt review is not a payment holiday and that consumers are still liable to pay their debts at reduced instalments”, cautions Malakalaka. Consumers should have a distributable income which will be used to offer reduced payments to credit providers. 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, adds Malakalaka. Details of the current fee guidelines can be obtained from the NCR website at www.ncr.org.za <www.ncr.org.za> .
“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”, clarifies Malakalaka. “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.
There are several steps that consumers who are debt stressed can take to remedy their situation and lessen the burden:
- Be proactive by seeking help when there are signs of over-indebtedness;
- Do not ignore your credit providers, reduced payment is better than non-payment;
- Where possible, do not borrow, but downgrade your expenses and cut out non-essentials;
- If under debt review, you cannot apply for further credit and your credit bureau profile will display a debt review flag until a clearance certificate is issued;
- Avoid under paying whilst under debt review to avoid termination by credit providers;
- If your circumstances change, always notify your debt counsellor;
- If you cannot get hold of your debt counsellor, contact or notify the NCR immediately; and
- Take charge of your finances at all times and know how your money is distributed to credit providers on a monthly basis.
The NCR conducts educational workshops to assist consumers to understand their rights and responsibilities on credit. Consumers who wish to have a workshop should contact the NCR on 0860 627 627.