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What is debt counselling?
The sections of the National Credit Act No. 34 of 2005 relevant to over-
Debt Counselling makes provision to assist over-
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-
If it is found that the consumer is indeed over-
Debt Counselling provides consumers with the peace of mind knowing that their financial affairs are now handled by an NCR-
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-
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-
5. If the consumer is not over-
6. If Consumer is over-
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.
The National Credit Act requires that a credit provider must carry out a financial assessment to determine the extent or amount of credit that a credit applicant can afford before entering into a credit agreement with the applicant. In performing an affordability assessment, a credit provider must determine and take into account the following:
If a credit provider fails to do an affordability assessment before advancing credit to someone, the credit provider could be guilty of entering into a reckless credit agreement.
If an agreement is declared reckless it may be fully or partially unenforceable, and the credit provider may lose all or part of the money advanced. The Courts may set aside all or some of the consumer’s obligations to repay the debt under the reckless agreement.
Debt Smart’s fees are set out in accordance with the guidelines provided by the Debt Counselling Association of South Africa.
1. Fees for an individual with gross income of more than R2 500.00 per month or household income of more than R3 500.00 per month:
The restructuring fee is payable at the first installment of the restructured monthly payment.
Should the Debt Counsellor fail to submit proposals to Credit Providers or refer the matter to a Tribunal or a Magistrate Court within 60 business
days from date of the debt review application the Debt Counsellor has to refund 100% percent of the fee paid by the consumer.
2. A Monthly After-
3. Should the consumer withdraw from the process after completing the Restructuring phase, a fee equal to 75 percent of the restructuring fee is payable by the consumer.
4. Legal fees, if and when they occur, are recovered from the consumer provided the amount of such fees are disclosed up-