Know your Rights and Responsibilities under Debt Review

Just below 50% of South Africa’s credit active consumers are struggling with debt, and according to statistics released by the National Credit Regulator (NCR), the number of consumers with impaired records has increased by 71,000 to 9.76 million up from 9.69 million in the previous quarter.

However, there is help at hand for consumers who are struggling to meet their monthly payments in the form of debt review. The aim of debt review is to assist over-indebted consumers who are struggling to meet their financial commitments by providing budget advice, negotiating with credit providers for reduced payments, and restructuring debts.

It should be noted that debt review is not a payment holiday and that consumers are still liable to pay their debts at reduced instalments. Consumers should have a distributable income which will be used to offer reduced payments to credit providers. For many consumers already in debt, the idea of contracting the services of a debt counsellor may seem excessive as there are fees involved.

However, debt review fees are dependent on the consumer’s disposable income and are capped. This means that you do not have to borrow money to pay debt review fees.

It is critical that consumers bear in mind that debt counsellors are not authorised to collect or distribute debt review funds. These funds must be paid to an NCR-accredited Payment Distribution Agency (PDA), and NOT directly to the debt counsellor. Debt counsellors must also collect their restructuring fees through an accredited PDA.

There are several steps that consumers who are debt stressed can take to remedy their situation and lessen the burden:

* Be proactive by seeking help when there are signs of over-indebtedness;

* Do not ignore your credit providers, reduced payment is better than no-payment;

* Where possible, do not borrow, but downgrade your expenses and cut out non-essentials;

* If under debt review, you cannot apply for further credit and your credit bureau profile will display a debt review flag until a clearance certificate is issued;

* Avoid under paying whilst under debt review to avoid termination by credit providers;

* If your circumstances change, always notify your debt counsellor; and

* Take charge of your finances at all times and know how your money is distributed to credit providers on a monthly basis.

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