From April to June 2020, over 1.5 million consumers took up payment holidays offered to them by various credit providers. Whilst this seemed to be the saving grace for stressed consumers at the time, industry experts estimate that it added nearly R21 billion to consumer debt. With additional payment holidays being highly unlikely, SA consumers are having to look to other methods of debt management, with debt review being a leading option.
Know the process of debt review
Approach a debt counsellor
- Make contact with a NCR registered debt counsellor (you can interact in person, over the telephone or do everything online)
- You will fill in a form 16, which will contain all your personal information and is essentially a snapshot of your income, expenditure, and overall financial situation.
Inform creditors and credit bureaus
- Your debt counsellor will now inform all your credit providers (retail store cards, personal loans, credit cards, vehicle finance, home loans etc) as well as the credit bureaus that you have applied for debt review.
- They will do this by means of a form 17.1.
Certificate of balances (COBs)
- Your debt counsellor will request certificate of balances from your creditors.
- Your creditors will return COBs to your debt counsellor, which gives details of all your accounts, including your remaining terms, interest rates and outstanding balances.
- Upon receipt of all the COBs from relevant credit providers your debt counsellor will then be able to see if you are over-indebted (not able to keep up with your everyday living expenses and meet your debt repayments on time).
- If this is found to be the case, they will inform your creditors via a form 17.2.
- Your debt counsellor will now use all the information at their disposal (including the COBs) to draft a reasonable repayment proposal that will suit your budget and this will then be sent to your creditors.
Creditors accept or reject repayment proposal and the matter goes to court
- If a creditor rejects the repayment proposal, they will provide the debt counsellor with a counter proposal and if you are not in a position to meet the counter proposal, the matter will be referred to a magistrate court for a final determination.
- If a creditor accepts the repayment proposal, an agreement will be in place which will be made an order of court.
- In most cases the consumer does not need to be present, and they will be represented by the attorney appointed by the debt counsellor.
- You don't have find a lump sum of extra cash to cover your debt counselling fees. All service fees are included in the restructuring agreement.
- Your first payment, known as the restructuring fee gets paid to your debt counsellor. This fee is set out in the National Credit Act.
- Your second payment is your legal fee that is paid to the attorney who has been appointed by the debt counsellor to attend to your matter in court.
- As per industry guidelines your creditors will receive money from the third month.
- All payments are done through a NCR registered and regulated Payment Distribution Agency (PDA).
- You never pay monies directly into your debt counsellors account.
You should always ask as many questions as it takes, until you are completely comfortable with your decision to go under debt review. Debt review can last anywhere from 12-60 months, and is something that you have to be completely committed to, as it is a process which cannot be easily exited from.