Closing loopholes in the debt counselling process

Thousands of indebted consumers enter the debt counselling process each year in the hope that it will help them out of the debt trap.  But many consumers find themselves facing the loss of their home and other valuable assets, despite renegotiating and paying lower loan repayments with their credit providers.

“The most important thing to remember if you’re under debt review is not to abandon all responsibility to your debt counsellor,” says Credit Ombud, Manie van Schalkwyk.  “Check your balances, payment history and follow all correspondence from credit providers closely.”

There are 1978 registered debt counsellors, of which more or less 850 are active.  Approximately R230 million was distributed to creditors each month and more than R4,7 billion since May 2008. Up to July 2011, 263 601 consumers had applied for debt review.

The Credit Ombud which has been effective in assisting consumers to resolve disputes involving credit bureau listings as well as disputes with credit providers, recently had its jurisdiction extended to cover debt counselling disputes. The office handles disputes against debt counsellors, the way in which monies are distributed by the payment distribution agent, or the way in which the credit providers, including the banks, handle credit related matters.


“The general view is that there are numerous problems with the debt counselling process,” says van Schalkwyk. “These are compounded by some dishonest and inefficient debt counsellors as well as credit providers who are more interested in the bottom line than in assisting over-indebted consumers,” says van Schalkwyk.


The debt review process was introduced under the the National Credit Act (NCA)  as a way for over-indebted consumers to try to settle their debt after re-negotiating affordable repayments with the credit providers.  The law entitles consumers to consult a debt counsellor who does an assessment to determine the extent of the consumer’s indebtedness.  The debt counsellor then communicates with all credit providers and submits  a repayment proposal, restructuring  the consumer’s debt repayment. If the proposal is accepted, the consumer continues under  the debt review process until all the debt has been repaid.


“From the complaints we have been seeing though, credit providers often don’t accept the first proposal as they may feel the repayments proposed are too low,” explains van Schalkwyk.  “The credit provider then sends a counter-proposal and if this isn’t accepted, then the debt counsellor must set the matter down in the Magistrates Court, where the Magistrate makes a ruling.”


He adds that understanding the debt counselling process and your legal rights under the NCA  is vital to prevent being unfairly treated.

“We receive numerous complaints where banks are in the process of sale in execution of a consumer’s home or even as late as the eviction stage before the consumer lays a complaint,” says van Schalkwyk.  “Mere application for debt review and paying reduced monthly instalments is no guarantee that creditors won’t take legal action against you.”


He says because of the backlog in the court system, the process can take many months and credit providers may terminate the debt review process after 60 days and proceed with normal debt collection procedures such as issuing summons, default judgments, attaching assets and sales in execution and finally, eviction.


“Consumers get into financial trouble for a variety of reasons such as losing their job, getting divorced or experiencing a death in the family,” says van Schalkwyk.  “The important thing to remember is to seek out help as soon as possible as credit providers are more likely to accept a repayment proposal before you are too far behind in your repayments. If something goes wrong with the process, complain as soon as possible.”


Many of the complaints received by the Credit Ombud involve consumers who have entered the debt review process, continued to pay the amount the debt counsellor told them to pay and without prior warning, receive a summons or notice of sale or eviction.

“Unfortunately under the law, the credit provider has usually acted within their legal rights,” says van Schalkwyk.  “Even if the consumer applied for debt review and is making regular repayments, until the parties reach agreement or until the Magistrate ruled in the matter, the credit providers can still initiate a legal process against the consumer to recover what’s owed to them.”

Other complaints to the office of the Credit Ombud stem from debt counsellors not following the correct processes, with consumers suffering the loss.  Communication between debt counsellor and consumer can also be poor, especially around counter-proposals.  “The debt counsellor may submit a proposal to the credit provider about how the consumer intends to settle his debt and the bank comes back with a counter-proposal,” says  van Schalkwyk.  “The debt counsellor sometimes doesn’t bother to tell the consumer and as a result of the lack of response to the counter-proposal, the credit provider terminates the debt review process.”

He says it is of utmost importance that credit providers and debt counsellors both ensure that the consumers are at all time fully appraised of all correspondence being exchanged.

Debt counsellors should also inform consumers about the consequences of the Notice of Termination of the debt review process from the credit provider.  If the debt counsellor cannot negotiate with the credit provider, the consumer will receive a summons, or worse, judgment will be taken.

“Educating yourself about the debt counselling process and all the legal requirements it entails is the key to successfully working your way out debt,” says van Schalkwyk.

To find out more about the complaints process log onto or call 0861 OMBUDS (0861 662837) or email us on