Debt counselling terminations: know your options

An increasing number of over indebted consumers are starting to turn to debt counselling as an option to stay afloat in the tough economic times we are faced with. Recent statistics from the National Credit Regulator indicate that 24 913 consumers applied for debt counselling in the first three months of this year.

‘It is encouraging that more consumers are starting to exercise the rights afforded to them by the National Credit Act and apply for debt counselling. With the growing number of debt counselling applications, we need to make consumers aware of the drawbacks  they could face when going though the process,’ states Credit Ombud, Manie van Schalkwyk.

At times however, the process fails due to administrative oversight or human error and this has severe consequences for the already distressed consumer. The results of such mistakes are often terminations by the credit provider.  Once a debt counselling matter has been terminated, the consumer is no longer afforded the protection that is provided by being under debt counselling and credit providers are able to proceed with legal action against the consumer. Common reasons for terminations include:

Matters that have been under debt review for some time, but have never had a court order granted

Short payments, no matter how small the amounts (a short payment by even R50 is enough cause for termination, strict adherence to the court order is required)

Credit provider not accepting proposals put forward by the debt counsellor – if no court order has been obtained, the credit provider can terminate the process  (a consumer is deemed under debt review as soon as a debt counsellor has accepted that the consumer is over indebted and sent notice of such to credit providers)

Miscommunication between the credit provider and the debt counsellor ‘We always advise consumers to always be aware of what is going on with their debt counselling matters and not just relax once the debt counsellor has taken over.  It is the responsibility and duty of both the debt counsellor and the consumer to ensure that all is in order.

By being vigilant and on top of things, the consumer is also able to detect problems early and avoid unnecessary terminations,’ adds van Schalkwyk.

Red flags to look out for include constantly receiving calls from credit providers demanding payment even though you are under debt counselling; credit providers not responding to the debt counsellor’s proposals or requests for balances on accounts.

The most important flag to look out for will be the receipt of a Termination Notice in terms of section 86 (10) of the National Credit Act. Once a credit provider sends a notice to terminate, a consumer only has 10 working days before the credit provider can proceed with legal action.

‘A consumer has two options with which they can respond during the notice period – they can either speedily go to court to obtain a court order or approach one of the dispute resolution bodies such as the National Debt Mediation Association(NDMA) or the Debt Counsellors Association of South Africa (DCASA) for assistance,’ states van Schalkwyk.

‘The possibility of obtaining a court date at such short notice is always very slim and extraordinary measures are required to enable the consumer to continue with debt counselling.  In instances such as these, the best option is to try and resolve the matter through negotiation, always bearing in mind that time is of essence,’ continues van Schalkwyk.

He advises consumers to do the following in order to avoid terminations:

  • Ensure that you are paying the correct amounts as stipulated in the proposal or court order
  • Always check statements for balances – if you no longer receive these, request them from your credit provider
  • Check that interest rates have been adjusted according to the court order
  • Stay in constant communication with your debt counsellor to ensure everything is in place and running smoothly

Consumers can approach the office of the Credit Ombud for assistance on how to deal with problems and disputes relating to their debt counselling matters.  They are also able to escalate complaints that they have lodged with other dispute resolution agencies such as the NDMA and DCASA. If the matter is not resolved within 20 business days or if they are
not happy with the outcome of their complaint they can contact the Credit Ombud’s office. Services are free of charge and consumers can call on 0861 66 28 37 for any queries or to log a complaint.