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What is debt counselling?

The sections of the National Credit Act No. 34 of 2005 relevant to over-indebtedness and restructuring of debt came into effect on 1 June 2007. The Act makes provision for the training and registration of Debt Counsellors to assist over-indebted consumers, who are unable to honour their credit agreements in a timely manner.

Debt Counselling makes provision to assist over-indebted consumers by restructuring their debts so that they can afford to meet their monthly living expenses.

Creditors are likely to take legal action when debtor’s accounts are in arrears, which can increase the financial burden by adding collection costs and penalty interest to any arrear amounts. Debt Counsellors protect the debtor from legal action by arranging a more affordable and acceptable repayment with each of the debtor’s creditors.

A consumer may approach a Debt Counsellor to carry out a confidential financial review of their financial affairs and officially determine whether or not they are over-indebted. This is known as a
DEBT REVIEW.

If it is found that the consumer is indeed over-indebted, the Debt Counsellor will proceed with
DEBT RESTRUCTURING by negotiating better repayments, interest rates and terms with the credit providers. Once consent is reached, the consumer is presented with one affordable monthly payment which is distributed to the creditors via an authorized Payment Distribution Agency (PDA).

Debt Counselling provides consumers with the peace of mind knowing that their financial affairs are now handled by an NCR-Qualified Professional. They can rest assured that their Debt Counsellor will deal with their creditors on their behalf, and that they are protected from legal action and possible repossession of assets.

The debt review process outlined in the National Credit Act comprises the following steps:


1. Consumer approaches a Debt Counsellor when they are unable to honour their monthly repayments on credit agreements in a timely manner.

2. Consumer completes an application form, pays a R57 application fee and provides the Debt Counsellor with a copy of their pay-slip, account statements and bank     statements.

3. Debt Counsellor issues a notification to all creditors and credit bureaus within 5 business days.

4. Debt Counsellor conducts an assessment of the consumer’s over-indebtedness. The consumer must:

  • comply with any reasonable requests by the Debt Counsellor to assist the evaluation of her state of indebtedness and the prospects for responsible debt rearrangement; and
  • participate in good faith in the review. The Debt Counsellor must complete the assessment within 30 business days after receiving the consumer’s application for debt counseling.

5. If the consumer is not over-indebted, a Letter of Rejection is sent to the consumer, creditors and credit bureaus within 5 business days.

6. If Consumer is over-indebted, the Debt Counsellor has 30 business days to negotiate payment rearrangement proposals with all creditors. Any arrangement the Debt Counsellor makes with creditors must be in writing and signed by all the creditors and the consumer.

7. If this proposal is accepted, the Debt Counsellor must file it as a Consent Order with the Clerk of the Court.

8. If the consumer and/or any creditors reject the proposal, the matter is referred to the Magistrate’s Court.

9. The Debt Counsellor obtains a debit order for the consumer’s reduced monthly payments for a PDA to collect and distribute to the creditors.


It sounds straight forward but in practice DEBT REVIEW is a laborious process as all creditors have to reach an agreement or compromise by accepting lower repayments. It pays to stay in touch with your Debt Counsellor throughout the process and to keep paying your creditors as much as possible while a reduction in payments are being negotiated.