Countries debt counsellors in dire straits

28 November 2012

September 10, 2007
By Tonny Mafu

Johannesburg – Delays in the finalisation of fees that debt counsellors levy on their clients have left some of them in financial dire straits.

In May the National Credit Regulator (NCR) said it was working with the department of trade and industry (dti) to come up with debt counselling fees.

Fees were expected to range from R500 to R1 500 per case. The aim was to come up with a fee structure that would be affordable to consumers and viable to debt counsellors.

After three months, neither the regulator nor the dti have finalised a fee structure. The NCR said it was waiting for the dti’s approval for a fee regime.

“I am so disappointed,” said Elizabeth Mokgata, a registered debt counsellor based in Johannesburg. She invested R50 000 to set up a debt counselling office after leaving her managerial job at a consultancy.

Inquiries on debt counselling have been overwhelming, but in the absence of a fee structure, she can only charge her clients a R50 administration fee.

Mokgata said this was insufficient to offset operating costs and had forced her to vacate the office she was renting. She is now operating from home.

Mpumalanga-based debt counsellor Johannes Zwane said he had spent R18 000.

No one has given him feedback about the fees that were to be a source of income for his debt counselling efforts. “At the moment, I am failing to pay for my computer, which has a monthly repayment installment of R400.”

The costs incurred in debt counselling are aggravated by the fact that some clients may have up to 10 creditors. Communicating with all the creditors requires more resources.

Zwane said it cost him up to R5 to fax a client’s documents to a single creditor. He suggested that the regulator should allow for a higher fee in cases where a debt counsellor helped a client with multiple creditors.

When asked whether he had expressed his concerns to the regulator or the recently formed Debt Counsellors’ Association of SA (DCASA), Zwane said: “It’s been difficult trying to get through to the NCR and I just heard about the [DCASA].”

However, the interim chairman of the DCASA, Anthony Richards, whose debt counselling company is based in Fourways, said it was business as usual. He charges his clients up to a maximum of R3 000.

This depends on the installments under the reviewed repayment arrangement.

According to Richards, another problem arises from the fact that debt counsellors have to gather information from different credit bureaus.

The NCR said its national loans register would come on stream only late next year.

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