What you need to know about asking for debt relief in South Africa

South Africans are struggling to meet their financial obligations because of the sluggish South African economy which has been exacerbated by the Covid-19 pandemic.

According to a report by the credit bureau, TransUnion in the first quarter of 2020, the outstanding debt balances of South African consumers are expected to continue to grow and the demand for credit has increased by 12% compared with the same period last year.

The report states that credit lenders expect delinquencies, defined as debt repayments that have been missed consecutively over 90 days, to increase as consumers struggle with increased unemployment, reduced working hours and less available household finances.

Delinquencies are likely to increase even further because the Corona-virus instituted payment holidays offered by banks and businesses has come to an end and consumers are dipping into their credit facilities, if they have not already done so, to cover monthly costs.

Hans Overbeek, Cyber Finance chief executive officer and Founder, said: “If like many South Africans, you find yourself in debt with no end in sight, it may be time to seek professional financial help from a debt management company to help you regain control of your finances.

“However, it is crucial to partner with a reputable agency or you may find yourself in an even worse financial situation.”

Cyber Finances highlights what you should look for in a debt management company and what you need to know to take charge of your debt with help from the professionals.


Check that your debt counsellor is registered with National Credit Regulator (NCR)

The National Credit Regulator (NCR) was established under the National Credit Act 34 of 2005 and is responsible for the regulation of the South African credit industry.

The NCR is tasked with the registration of credit providers, credit bureaus and debt counsellors, and for monitoring the industry to ensure all credit companies and employees comply with the National Credit Act.

On completion of the debt management course, every debt counsellor applies to complete the NCR examination, once passed the NCR issues the debt counsellor with a registration certificate.

As a potential client, you may request to see this document and should do so. If a debt counsellor refuses to produce this certificate you can check if they are registered by visiting the NCR website and searching their records.

Another way to check whether a debt management company is worth partnering with is to check reviews about them on popular review profiles such as hellopeter.com and social media.

How the company manages negative responses and the different type of complaints will give you an indication of whether the company really cares about helping people improve their financial situation.

If reviews, recommendations and posts have been disabled on social media profiles (Facebook and Instagram) it could indicate a problem as the company is hiding its online reviews, Cyber Finance said.

“When checking reviews, it is important to take them with a pinch of salt. Focus on how the company handles matters and whether the issues being brought up seem to be the same for all the reviews or if each review is unique to the person particular experience with the company.

“This should give you an indication as to how the company handles itself and whether they are worth partnering with,” Overbeek said.


Understand there are costs involved and know your rights

Make sure you familiarise yourself with the debt counselling process and understand your rights and obligations before you enter into any agreement, Overbeek said.

“It is essential that you understand that debt management solutions are not free. While you may only be required to pay one monthly amount to your debt manager each month, included in the amount are the fees for the debt management service. The rest is paid to your creditors to pay off your debts.”

All debt counselling fees are regulated by the National Credit Regulator so make sure you check the guidelines and compare the fees your debt counsellor charges, to ensure pricing is in line with the recommended fees, Overbeek said.


Keep tabs on your debt and review your statements

Even though you have partnered with an NCR-registered debt counsellor, be proactive, he said. Ask to see the financial statements each month. Importantly, make sure that in addition to the debt counsellor’s fees, your monthly debt repayment amount is sufficient to decrease your total monthly debt repayments.

The Consumer Protection Act states that if a debt counsellor refuses to share statements with you regarding debt review or other debt solution services, you can report them to the Credit Ombud.

The Credit Ombud clarifies its position:

We advise that the jurisdiction of the Credit Ombud relates to matters where consumers are negatively impacted by credit bureau information and/or to issues relating to non- bank credit transactions pursuant to the requirements of the National Credit Act and the relevant Codes applicable thereto. We may investigate disputes against subscribing members. The Credit Ombud not only resolves disputes between members of the non-bank credit industry (such as micro-lenders or retail stores) and consumers, but will also investigate complaints relating to credit bureau information – free of charge.

A few years ago, the Credit Ombud was in a position to investigate debt review disputes, however, the situation changed in that the Codes relating to debt review were amended and the arrangement with the Credit Ombud and the National Credit Regulator (NCR) was that all debt review matters would be dealt with by the NCR. Accordingly, for consumers that approach the Credit Ombud regarding debt review challenges being experienced, we are obliged to refer them to the NCR.

The Credit Ombud shall investigate a dispute from a consumer regarding the removal of a debt review flag, provided that the;

  • consumer followed the complaints process at the credit bureaux and the 20 business days afforded to the credit bureaux in terms of the National Credit Act had expired and the matter remained unresolved and/or the consumer remained dissatisfied with the outcome; or
  • credit bureaux had reverted to the consumer prior to the 20 business days with written feedback that they had credible evidence thus the debt review flag could not be removed; and
  • consumer is in possession of the paid-up letters for each account that formed part of the debt review process; debt help system at the NCR had been updated ( we would require proof); and consumer is in possession of the clearance certificate.

“Any debt counsellor worth their salt will be more than happy to provide you with monthly statements and cost breakdowns. Any counsellor who withholds this important financial information should be a red flag,” said Overbeek.

Another critical point to note is that just because you have partnered with a debt counsellor doesn’t mean that you cannot contact your creditors directly and ask them to see statements.

“In fact, you should, on occasion, check statements from your creditors to make sure your payments are being distributed by your debt counsellor and are reaching all of your creditors, not only a selection,” Overbeek said.


Read: A top investor says South Africa is in a ‘debt-trap twilight zone’

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What you need to know about asking for debt relief in South Africa