Debt counselling is ‘misunderstood’

28 November 2012

From Business Report
March 12, 2008

Durban – Some consumers misunderstood the purpose of debt counselling, perceiving it to be the means to escape their repayment obligations,
South Africa’s four major banks and the national credit regulator (NCR) said yesterday.

Three of the banks – Standard, First National and Nedbank – have received more than 14 500 applications from over-indebted customers who wanted the assistance of debt counsellors since the procedure was introduced last June.
The NCR has had 8 031 applicants.

Most applicants stopped paying their debts after they were given the go-ahead by counsellors to seek counselling.

Mpho Thekiso, project manager for debt counselling at the NCR, conceded there was still a need for education on the objectives of the debt-relief process.

“Some debt counsellors do not disclose all the information to consumers upfront, which then makes people think that they have a payment holiday,” Thekiso said.

“Nothing stops the credit provider from pursuing the debt, even if a person has applied for debt counselling. The only thing that [credit providers] cannot do is take legal action against you. However, they can say you are a slow payer,”
Thekiso added.

Kim Royds, the director for customer debt management at Standard Bank, said: “From
industry feedback it has been ascertained that debt counsellors advise consumers to cancel debit orders and rather pay the payment distribution agent.”

Royds said about 5 000 clients had applied for debt counselling involving about 12000 accounts.

Laurien Kemp, the head for debt rehabilitation, recoveries services and specialised collections at Nedbank, said there were more than 5 000 applications and 6 400 affected credit arrangements. The bank had not approved any applications so far.

Beverly Pirrie, the National Credit Act compliance manager at FirstRand, said there
were 4 500 applicants who had requested to be put on debt counselling and the rearrangements were in progress.

Johan Geldenhuys of Absa said debtors who were accepted into the debt-counselling process did not have to make payments until a solution was found and ratified by the courts. This had to be finalised within 60 days.

Once a person applied for debt counselling, the counsellor had to notify all the credit providers and the credit bureau within five days. The consumer would then not have access to any more credit.

The debts would then be rearranged by either lowering interest rates, extending repayment periods or the lender forfeiting the interest and accepting only the capital amount.

A consumer would qualify for credit as soon as their debt was settled and they had obtained a clearance certificate from the debt counsellor.


Fast Facts

Anyone who, after deducting living expenses from their net salary, has less cash left over than the instalments on their total debt, may apply for counselling.

There are 294 registered debt counsellors countrywide and 46 approved awaiting
conditions of registration.

There are 22 531 people who have applied for debt counselling since June.

A counsellor charges between R300 and R4 000 a consumer.

To be a registered debt counsellor, you must:

Be older than 18 years.

Have Grade 12 or equivalent level four qualification issued by the South African
Qualifications Authority.

Successfully complete a debt counselling course approved by the National Credit Regulator (NCR) and provided by an institution approved by the NCR.

Have a minimum two years’ experience in either legal/para-legal services, accounting/financial services or education/training services, counselling of individuals and a general business environment.

Demonstrate the ability to manage your own finances, as well as provide counselling
and transfer skills.

Be computer literate.

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