Debt Counselling in South Africa

Debt counselling, according to the National Credit Regulator,  is a process of assisting consumers that are experiencing debt related problems and are having difficulty making their current monthly payments by providing them with budget advice support (help you restructure your finances) and mediation with credit providers.

 

People who have mounting personal debts have avenues to bargain for a more sustainable repayment plan with their financiers through debt counselling. The mechanism for this is contained in the National Credit Act (NCA) which became effective recently and gives effect to credit arrangements entered into both before and after the passing of the law.

 

A debt counsellor is someone who is registered with the National Credit Regulator (NCR). A debt counsellor can help you evaluate your financial situation if you are heavily burdened in meeting your obligations. Even your financial creditor can refer you for debt counselling should you encounter difficulties in managing your obligations with them. Debt counselling is a very good recourse to have in terms of restructuring your debt payments and obligations.

Debt counselling makes no restrictions to anyone and it is open to both small and big indebtedness and people can just approach debt counsellors as they wish. Debt counsellors however do charge professional fees, but these are nominal compared to the assistance they can give you in managing your debts.

Some debt counsellors would charge a little bit more than standard practice for an initial review of your debt profile, but some also do offer continuing review and evaluation of your debts with proportionate continuing fees. In general, there is still no standardized fees schedule that should be followed by debt counsellors and each counsellor has his or her own set of fees, depending on his or her qualifications and experience. The agency National Credit Regulator (NCR) hopes to adopt policies that could assist those in the low income bracket in meeting payment obligations to their debt counsellors.

Prior to deciding on whether or not to accept your request for debt counselling, the debt counsellor would first examine your financial profile to check if you are over-indebted or not. Over-indebtedness is a situation wherein you will not be able to meet your payment obligations on time because of the tremendous amount of your debts.

 

The debt counsellor will go over your records and look at your current income and possible other income avenues, and then compare them with all your existing debts and obligations. He or she will try to create a balance between these two items.

Once the debt counsellor has come to terms with you, he or she will send a formal advice or correspondence to all your financiers and the local credit office that you are getting debt counselling services. At this point, you will not be able to get any more financial credit until all your financial obligations are settled. You may even be required to cut up your credit cards and other store cards.

 

The main thrust of debt counselling is to weigh all your outstanding debts together with your financial capability in coming up with monthly payments, and then negotiate with the financial creditors in restructuring your debts for a singular payment package scheme. Should the creditors agree to the terms negotiated, the debt counsellor, similar to an attorney acting in your behalf, will file an application with the National Consumer Tribunal for an agreement notice for the refinancing plan.

Lending procedures and terms are laid out in the National Credit Act of 2007. Based on this law, a creditor must first secure complete information about a candidate borrower's income and expenses to find out the borrowing capacity of the borrower. This procedure helps in avoiding a candidate borrower ending up with over-indebtedness and going through the pains of debt counselling.

 

The debt counsellor must determine whether his or her client is over-indebted or unable to meet obligations in a timely manner, in order to pass the requirements of debt counselling or debt review. The creditors, together with the National Consumer Tribunal, will have to collectively agree to the debt servicing plan submitted by the debt counsellor before the process of debt counselling could push through.

Debt consolidation is a usual scheme resorted to by debt counsellors, in that several loan repayments are bundled up into a single large payment that has a lower interest. This should be properly transmitted to the financial creditors and the credit bureau.

 

It is important that the person who engages debt counselling realize that he is still solely responsible for his debt, that his creditors have the right to pursue his obligations, and that his account will remain inactive for the duration of the debt counselling.

Contact Len at len@elmor.co.za or 0726503132 for further information on Debt Counselling.