Debt relief measure for over-indebted consumers
Consumers who are experiencing financial distress should not ignore their debt obligations, they need to approach credit providers and communicate their financial position and negotiate reasonable repayment options.
Debt counselling was introduced by the National Credit Act as a voluntary debt relief measure to assist over-indebted consumers.
A consumer is over-indebted if their income is not sufficient to cover all their living expenses and debt repayments. Various circumstances such as job loss, reduction of income, sickness, death, the rising cost of living (petrol hikes, increase in food prices, electricity, etc.) and others are often the main contributors to consumer over-indebtedness.
Consumers who are experiencing financial distress should not ignore their debt obligations, they need to approach credit providers and communicate their financial position and negotiate reasonable repayment options.
If this attempt fails, consumers are encouraged to consider debt counselling and approach a registered debt counsellor who will on their behalf negotiate reasonable repayment terms informed by what the consumer can afford with the credit providers, said Advocate Kedilatile Legodi, Manager: Debt Counselling at the National Credit Regulator(NCR).
Legodi said the concept of debt counselling is often misunderstood by many, as a result consumers miss out on the benefits and the protection that debt counselling offers.
In addition, said Legodi, there is a high number of false and misleading debt counselling marketing practices noted by the NCR either online, on social media, or telephonic with the sole intent of exploiting unsuspecting and financially distressed consumers. Some of these marketing practises, promise a certain percentage of debt reduction (even prior to a financial assessment), savings, or consolidation.
“If it sounds too good to be true, it probably is. Consumers are advised to be aware of false and misleading practises and to not fall victim particularly if approached. Understanding the debt counselling process from end to end, the consequences, the applicable fees charged, when, where, and how to pay such fees, the various steps of the process, the prescribed timelines, the provisions to exit debt counselling, and others are important elements that the consumer must ensure knowledge of before signing on the dotted line,” said Legodi.
The manager said debt counselling is only conducted by a debt counsellor registered with the NCR, adding that in terms of the National Credit Act, debt counsellors are registered as individuals and not as a juristic person/company.
She added that a financially distressed consumer seeking the services of a debt counsellor, must ensure that they know the full details of the debt counsellor offering to assist. This includes the debt counsellor’s name and surname, place of practice, and the NCR registration number which is issued upon registration by the NCR.
Even if the debt counsellor is operating using a business/trading name, the consumer has a right to be provided this information. Legodi said a consumer is considered to be under debt counselling when they have applied for debt counselling in a prescribed manner as set out in the National Credit Act.
She added that there is a difference between debt counselling and debt consolidation, saying that debt consolidation offers the consumer one loan to pay off all debts.
“This will result in the reduction of the consumer’s multiple payments into one single monthly payment to the credit provider that has granted the consolidation loan. If approached and offered debt counselling, insist on getting clarity from the caller regarding their source of information or where they received your contact details and do your homework first before you commit to what is being offered. Debt counselling does not cancel debt, it helps consumers to make reduced payments using disposable income and without having to borrow more money. If under debt counselling you will be paying reduced amounts, as a result, the repayment period of your debt may increase and you will take longer to pay off your debts,” she said.
She added that if consumers wish to lodge a complaint against a debt counsellor, credit provider, credit bureaus, or a payment distribution agent they may send the complaint to complaints@ncr.org.za.
Legodi said: “To get a list of registered debt counsellors operating closer to work or residential areas, consumers are advised to visit www.ncr.org.za. Given the current economic climate, many consumers will undoubtedly find it difficult to cope and manage contractual repayments, please do not despair, be proactive, do not be pressurized, address your financial hardships by seeking more information on the debt counselling process and gain a thorough understanding because an informed consumer is a protected one.”
HAVE YOUR SAY
Like the South Coast Fever’s Facebook page
