Get a handle on debt with a bit of help

A consumer is considered to be over-indebted if the available income is not enough to pay for basic living expenses and debts.

The National Credit Act (NCA) introduced debt counselling as a debt relief measure, aimed at assisting and rehabilitating consumers who are over-indebted.

Assistance is provided by debt counsellors, registered with the National Credit Regulator (NCR), through negotiation with credit providers and a reduction of monthly contractual payments in line with the consumer’s disposable income.

Rehabilitation is realised through regular payments until the debt is paid up and a clearance certificate is issued.

When consumers are under debt counselling, they get protection against legal action by credit providers and for as long as they maintain payments.

Consumers who are married in community of property have to make a joint debt counselling application.

There is no prescribed and fixed debt counselling repayment term and the period a consumer remains under debt counselling depends on that person’s income, basic living expenses and the type of debt.

Once all debts have been paid up, the consumer is issued with a clearance certificate to show that they are debt free.

At times, debt counselling is offered or advertised as a payment holiday or a savings plan where consumers are promised to save up to a certain percentage of their monthly instalments.

This type of advertisement is misleading and prohibited. Consumers need to understand that debt counselling is a relief measure to cope with the financial distress and that they remain responsible for their debts.

Debt counselling does not in any way, give consumers a break from paying their debts.

Consumers are encouraged to be proactive and seek help immediately they notice signs of over-indebtedness and financial distress.

Before consumers sign the counselling application form, they have to understand what the process is and what their rights and obligations are as well as the consequences of being under debt counselling.

Debt counsellors have an obligation to explain the process in detail and to disclose applicable debt counselling fees in writing. To get a list of registered debt counsellors, consumers should visit the NCR website (www.ncr. org.za).

Legodi is manager for debt counselling at the National Credit Regulator

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