South Africans being tricked into debt review
South Africans are being warned about a scam that is trapping unsuspecting consumers in debt review without their knowledge, leaving them unable to access banking finance.
This warning was issued by the National Automobile Dealers’ Association (NADA). Brandon Cohen, NADA Chairperson, said the trend has become increasingly concerning as more people report being targeted.
“South Africans are increasingly receiving unsolicited calls from organisations offering debt relief services,” he said.
He explained that by participating in a brief survey and answering a series of questions with a simple ‘yes,’ consumers may find themselves enrolled in a debt review programme without providing explicit consent.
Debt review is a legal process designed to assist consumers who are over-indebted.
It involves a debt counsellor assessing an individual’s financial situation and then negotiating with creditors to restructure debt into a more manageable repayment plan.
The counsellor is paid for their service, and once the debt review is approved, it becomes a court order.
“The debt review program, once approved, becomes a court order to which the applicant must adhere until debts are fully settled,” Cohen said.
While the process has clear value for those in financial distress, it is not a decision to be made lightly.
Cohen cautioned that entering debt review should be a last resort, only after exploring other avenues, such as speaking directly with banks or consulting a qualified financial advisor.
“Debt review plays a significant role in assisting consumers who find themselves in a debt spiral, but it is not something to enter into casually,” he said.
The consequences for those who are tricked into debt review can be severe. The process is not a quick fix and can last several years, depending on the individual’s financial obligations.
No new credit may be obtained during this period. For consumers who unknowingly enter debt review, the inability to access finance often comes as a shock, particularly when they need vehicle finance.
Remain vigilant
According to NADA, rejections for car finance applications have risen because buyers were under debt review without realising it. Cohen explained that the financial impact extends beyond the duration of the process.
Even after debts are settled, a debt review note on a consumer’s credit record can affect their credit score and make it difficult to access new credit at affordable rates.
This long-lasting consequence can limit financial opportunities and delay important purchases.
Cohen urged consumers to remain vigilant and take precautionary measures to avoid falling victim to these scams. “Do not consent to anything you do not fully understand and have had a chance to think about,” he said.
“Make certain debt review is the right option by conducting independent research and only make use of the services of registered debt counsellors with a proven positive track record.”
He added that consumers should consider using caller identification software to avoid unsolicited calls that could lead them into the debt review trap.
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