Debt counsellor faces legal action

by Lyse Comins March 27 2008 IOL.co.za. Originally from the The Mercury on March 27.

The National Credit Regulator is clamping down on a Durban debt counsellor who is allegedly overcharging cash-strapped consumers for his services and collecting debt repayments in contravention of his registration conditions.

Johan Van Zyl, against whom the regulator has issued a compliance notice, responded by saying there is no legal basis for the action being taken against him as he had not contravened the National Credit Act. He said he had taken legal counsel and was preparing to apply for a high court order against the compliance notice.

Standard Bank, First National Bank and Nedbank have received more than 14 500 applications from over-indebted customers seeking assistance from debt counsellors. The National Credit Regulator's project manager for debt counselling, Mpho Thekiso, said the regulator had received 8 000 applications and this figure was "increasing every day".

Jan Augustyn, investigation and prosecutions manager at the regulator, said Van Zyl had failed to comply with "the specific conditions of his registration" by receiving payments from consumers who had applied for debt review and distributing the payments to credit providers and not to a payment distribution agency approved by the regulator.

He said Van Zyl had failed to perform "timely and fair" debt counselling services to consumers as required by the Act. "The action underscores the NCR's (the regulator's) determination to bring debt counsellors into line with the conditions of the recently enacted National Credit Act."

He said Van Zyl had recovered debt review fees from consumers without prior and full disclosure of the fees. Thekiso said she had received many consumer complaints about Van Zyl. Two consumers complained that he had quoted them service fees of R8 000 and R12 000 respectively.

She said while there was no fee structure stipulated in the Act, the regulator had negotiated a fee structure which was accepted by the Debt Counsellors' Association.

It had been agreed that counsellors would charge a R50 application fee and claim a subsidy of up to R650 for consumers earning R2 500 or a household income of R3 500 a month. Those earning more than R2 500 a month would be charged a R50 application fee and the first instalment of the restructured debt to a maximum of R3 000 would be paid to the debt counsellor.

In terms of Section 55 (3) of the Act, Van Zyl was ordered to submit a detailed list of funds received from his customers and to transfer all funds received to a registered chartered accountant or attorney nominated by the credit regulator.

Van Zyl justified his fees, saying that "whether the first instalment is R50 or R8 000 we take that as our fee, but every case has to be referred to a magistrate's office and if there are lawyers involved and you eventually qualify for a court order it costs between R500 and R2 000."

He said his administrative expenses were very high. "My internet bill alone is R14 000 a month and my phone bill is R10 000 a month. If we pay the money over to the approved agency then who will pay us? I have given a lot of service to customers free of charge."

Van Zyl said the compliance letter had not provided any specific evidence of cases where credit grantors had not been paid by him. He added that he had in one case paid an advocate R7 000 out of his own pocket to assist a consumer. He was confident that he would be granted an interdict because the Act made provision for debt counsellors to collect and disperse loan repayments on behalf of consumers.

The credit regulator said Van Zyl had the right to appeal within 15 days.