Debt Counselling: Your questions answered.
What is the NCA?
National Credit Act. Act prescribing rules and regulations for the credit industry and sets the groundwork for over-indebtedness and debt counselling.
What is the NCR?
National Credit Regulator. Regulatory body responsible for monitoring the credit industry
What is debt review?
Debt review also known as Debt counselling is a legal process introduced by the National Credit Regulator. It is a process set up to help South Africans who are struggling to pay off their debt. The debt obligations are restructured, and interest rates reduced to enable consumers to meet their monthly commitments.
What is a debt counsellor?
A debt counsellor is an individual is fully qualified and registered with the NCR. You can find one here. The debt counsellor regulates the process of assisting consumers manage their debts.
How do I know when I need debt review?
There are a few key indicators that you are struggling with your debt and need help. Ask yourself:
- Are you taking out more debt to pay existing debt?
- Are you using credit for living expenses? i.e groceries?
- Are you avoiding phone calls from your creditors?
- Are you starting to lose sleep from stressing about your finances?
What does it be mean to be over-indebted?
If your current debt exceeds your current income after all your living expenses have been paid you are likely to be overindebted
For how long does the debt review process last?
It is dependent on the outstanding debt amount but the maximum time the process lasts is 60 months.
What are the rights of consumers in debt counselling?
- Consumers have a right to apply for debt counselling
- Consumers have a right to request for, and be provided with, reasons if the application for debt counselling is rejected
- Consumers have a right to a written disclosure of fees applicable prior to application for debt counselling
- Consumers have a right to a full disclosure of the debt counselling process prior to application for debt counselling
- Consumers have a right to receive distribution statements from their debt counsellors and PDAs on a monthly basis
How long will it take to start to feel relief from the stress of my debts?
Almost immediately. Within the first 5 days we will have drafted a proposal to restructure your debts and have created a provisional repayment plan that you can afford. You will then start to make a single monthly payment to a Payment Distribution Agency, who will distribute the money to your various creditors according to your plan. During the first 60 working days, your credit providers will not be allowed to implement action against you, and we will use this time to prepare your final repayment plan.
What will happen if my credit providers are not happy with the revised payment plan?
Providing we make a reasonable offer to your credit providers we will request the court to make the review an order of court. Should your credit providers take action against you any payment that was due to them each month may in some instances be used to defend this action. Working with our experienced debt counsellors, it is unlikely the credit providers will not accept your repayment plan.
Will I have to go to court?
No, you do not have to go to court. Courts are used to dealing with debt review applications and rarely need the consumer to attend. The court order is there to protect you and stop the credit providers from hassling you.
How do you manage to reduce the payments?
We renegotiate the payment terms with your creditors, so you pay less over an extended period, and reduce the interest rate on your loans saving you money in the long term
What is a debt consolidation loan?
One sizeable loan designed to pay your debts once off. So instead of paying several creditors you are left with one creditor. Simply saying multiple debts are combined into a single debt but often at a higher interest rate
What is the difference between debt review and debt consolidation?
Debt review is the restructuring of all your debt repayments into one affordable monthly repayment by extending the terms of your credit agreements and decreasing interest rates, whereas consolidation entails taking out one large loan to settle all debts and only paying back one loan. Consolidation loans require that you are not over-indebted at the time of application.
What happens after debt review?
Once the process has completed and your debt has been repaid, your counsellor will issue you with a clearance certificate. The certificate is then submitted to the Credit Bureau so that they can update your record and remove any negative information they hold.
What happens if I miss my debt review installments?
It is always best to pay something rather than nothing to keep the process going. If you are struggling to make your payments contact us immediately. We may be able to make a temporary solution with your credit providers or even claim creditor linked insurance should you be retrenched.
Can I use my credit cards during the debt review?
No. This is to protect you from accumulating even more debt that you are unable to pay off.
Who can apply for debt counseling?
Anyone who has a steady income and feels they may be over indebted can apply for debt review. You qualify if after assessment your debt counsellor can confirm you are indeed overindebted
What costs are involved in debt review?
Debt counsellors’ fees are regulated by the National Credit Regulator (NCR) and form part of your monthly repayment amount so you will not be charged any additional or upfront fees. Generally the 1st 2 monthly payments go to the debt counsellor for administering the debt review and legal process. Your creditors are then paid from month 3.
Can I withdraw from DC once I have signed up? If yes, will my fees be refundable?
You may only withdraw from Debt Review prior to be found over-indebted (Form 17.2) or by obtaining a court order declaring you not over-indebted. You will not be entitled to receive a refund of the restructuring fee once the Debt Review process has started.
Can I change Debt Counsellors?
You may at any time change debt counsellors provided that all DC fees are paid up to date and we will facilitate this process. It is important to note that your new debt counsellor cannot restart the process and is not entitled to charge restructuring fees again.
Who is responsible for payment distributions to credit providers?
All your payments are handled by an accredited Payment Distribution Agency (PDA) tasked with distributing payments to your credit providers.
How am I protected while under DC?
We obtain a court order on your behalf which replaces all your credit agreements with the restructured amounts. This order protects you from any legal action from your credit providers as long as you are not in arrears.
Does my marital status affect or impact this process?
If you are married COP or traditional marriage, you and your spouse are seen as one legal entity and will need to do a joint application for debt review. ANC/Islamic marriages are single applications but can also be joint applications, especially where there is a joint bond.
Can I enter DC if I have already been summonsed or handed over?
You can still apply for debt counselling to protect the rest of your accounts if you have already been summonsed. We will also negotiate with the summonsed accounts to arrange an affordable repayment amount.
What is a section 129 vs letter of demand?
A Section 129 letter is the start of the legal process to obtain a court judgement against you. You have 10 days from receipt of a Section 129 letter to remedy the default or apply for debt counselling. After 10 days from receipt of a Section 129 letter or a court judgement the account may not be included in Debt Review, but we can still negotiate an affordable repayment on your behalf. A letter of demand precedes legal action and is an indication that you may be over-indebted and should possibly consider Debt Review.
What is sequestration vs debt review vs administration?
- Sequestration is the voluntary surrendering of estate to the High Court under the governance of the Insolvency Act 24 of 1936.
- Debt review is the restructuring of all your debt repayments into one affordable monthly repayment by extended the terms of your credit agreements and decreasing interest rates.
- Administration is a legal process where the debt repayment terms are extended, current debt Instalments are reduced and the credit providers receive a debt repayment once every three months. Administration takes much longer to complete than debt counselling.
What is reckless lending?
A credit agreement is deemed to be reckless if the credit provider failed to conduct an affordability assessment and entering into that credit agreement would make the consumer over-indebted.
What if I am under DC and my credit providers contact me directly?
Your creditors should deal with us while you are on Debt Review. Should your creditors contact you, you can contact us and we’ll deal with them directly.
What is a credit report?
A detailed summary of your credit/financial history prepared by the Credit Bureau.
Contact us today and we'll get you back in control of your finances.