The South African Banking Risk Information Centre (SABRIC) has warned consumers to be careful of false promises from Debt Counsellors who may be abusing their profession and the debt review process. Luke Hirst, MD of Debt experts DebtBusters, says ‘Yes, I agree that some debt counsellors are not offering clients the full information upfront and […]
28 November 2012
by Neesa Moodley-Isaacs
The Debt Counsellors Association of South Africa has proposed certain guideline fees for debt counsellors that should help you to know what you will pay if you need to use the services of a debt counsellor.
If you are struggling to manage your debt and feel that you are over-indebted, you can now, in terms of the National Credit Act (NCA), seek the assistance of a qualified debt counsellor.
However, beyond a R50 plus VAT application fee, the Act does not regulate the fees that debt counsellors are allowed to charge and this has left consumers unsure what they may be charged and debt counsellors unsure what they can charge.
This uncertainty has contributed to the shortage of qualified debt counsellors, with only 185 fully registered counsellors serving the whole country.
Gabriel Davel, the chief executive of the National Credit Regulator, says it has been suggested that the Department of Trade and Industry should regulate further fees for debt counsellors but this has not been done yet.
In the interim, the Debt Counsellors Association of South Africa has come up with a proposal that has been examined by the regulator but which still needs to be regulated by the Department of Trade and Industry before it can become official.
The association is proposing that if a debt counsellor finds you are indebted and agrees to help you restructure your debts, that you pay the counsellor a restructuring fee, which will be the lesser of either R3 000 or the first instalment of the debt-repayment plan.
However, if the debt counsellor finds you are not over-indebted, then the proposal suggests that you will have to pay a rejection fee of R300, excluding VAT.
Since R3 000 is a large sum of money for someone who is already over-indebted, the Debt Counsellors Association suggests that you pay R500 once your debt-repayment plan has been submitted to all your credit providers.
It suggests that the balance of the restructuring fee will have to be paid once all the credit providers have accepted the debt-repayment plan.
If the debt counsellor continues to advise you, it is proposed that you will then have to pay the debt counsellor a monthly after-care fee of five percent of your monthly repayment instalments, excluding VAT, for two years.
After two years, the monthly after-care fee is reduced to three percent, excluding VAT, of your monthly repayments. You will have to start paying the monthly after-care fee in the second month after you have paid the debt restructuring fee.
If you decide to withdraw from the debt-review process after your debt-repayment plan has been submitted to your credit providers, you still have to pay the first instalment of the restructuring fee, up to a maximum of R500.
Legal fee liability
Unfortunately, if your credit providers don’t approve the debt-repayment plan and the debt counsellor has to go to court to obtain a court order, then you will be liable for legal fees.
However, the debt counsellor has to disclose the legal fees to you upfront and you must agree to the legal fees in writing.
To find a registered debt counsellor in your area, call the NCR on 0860 627 627 or visit the website at www.ncr.org.za