Many consumers find themselves in the undesirable position of not being able to cope with their debt repayments as their finances take strain with the demands of a new year. Unable to meet their financial obligations, many consumers face losing their possessions.

“All is not lost, there is help at hand for consumers who are seriously under strain from being over indebted,” says Credit Ombud Manie van Schalkwyk. “Going under debt review is one of the options available to consumers in order to assist them to restructure their debts and have better payment options to help them cope with their debts,’ continues van Schalkwyk.

In terms of the National Credit Act, consumers may formally apply for debt counselling if they are unable to meet their financial commitments when it comes to credit agreements that they have. Introduced in 2007 as a way of assisting over indebted consumers, 292 905 consumers have applied for debt review to date according to the National Credit Regulator (NCR).

Figures compiled by the NCR estimate an average of 5 500 consumers apply for debt counselling on a monthly basis. These figures are definitely set to rise as more South Africans feel the squeeze of the economic times that face the country.

Consumers can enlist the services of a debt counsellor by selecting a registered agent from a list provided by the NCR. It is vital that people deal with reputable and legitimate agents as they will be entrusting their finances to the debt counsellor who will act as the consumer’s agent.

Van Schalkwyk cautions consumers who go under debt review not to leave the entire management of the process to their debt counsellor. ‘You have to keep in constant communication with your debt counsellor and know exactly what is going on with regards to your repayments. Often, consumers under debt review assume a passive stance and don’t keep abreast with the status of their accounts,’ adds van Schalkwyk.

This is often how the process intended to assist consumers, can go wrong.

‘Debt counselling is not without its problems, but if you are perusing your statements of account and ensure that you know exactly what is going on with your accounts, this process could work as it was intended to,’ says van Schalkwyk.

The debt review process involves the following:

• your appointed debt counsellor assessing your state of over indebtedness and reviewing your income and expenses
• upon your qualification for going under debt counselling,  the debt counsellor negotiating revised repayment proposals on your behalf with your credit providers
• agreement on new repayment proposals with your credit providers

Proposals are not always accepted in the first instance by the credit providers. This may necessitate that the debt counsellor comes up with several proposals to the credit provider before there is agreement by all parties. It is vital that consumers are informed of any counter-proposals from the credit provider by their debt counsellor. Once consensus has been reached, a Consent Order will be granted by the Magistrate Court to enforce the repayment proposal.

‘It is vital that consumers stick to the agreed repayment plan as any deviation from this can result in the credit provider terminating the proposal and instituting legal action to recoup their money,’ warns Van Schalkwyk.

He further advises consumers to:

• enlist the services of a reputable debt counsellor who is registered with the NCR
• get references from people who have used the debt counsellor’s services before
• find out how much the debt counsellor’s fees amount to before signing up with them
• thoroughly check the terms of their contract with the debt counsellor
• make sure that all counter proposals from credit providers are communicated to you
• ensure that your final proposals are accepted by your credit providers
• check monthly statements of account to ensure that credit providers are receiving payments

Credit providers are well within their rights to terminate the proposal at any given point in the debt counselling process. They should however send the consumer and the debt counsellor notice to terminate before doing so.  ‘It is vital that consumers act swiftly in the event that they receive notice to terminate form the credit provider.  In many instances, the credit provider will be prepared to accept a revised payment plan,’ adds van Schalkwyk.

Should consumers find that the credit providers refuse to negotiate a revised payment plan after termination or there is a dispute regarding the debt counselling process, they should refer their matter to DCASA or the National Debt Mediation Association. Failing assistance from these organizations, they can refer their matter to the Credit Ombud’s office for help.

Consumers can contact the Credit Ombud on 0861 66 28 37 or visit http://www.creditombud.org.za/.

The NDMA can be contacted on 0861 11 6362 and DCASA on 0861 43 2272.