Benefits of Debt Review

A: It is the employer’s choice on what the exact requirements are for their employees, so we will not be able to say definitively.

However, historically we have seen that in general being under Debt Review is not an issue when looking for employment. The only industry that might have some question is if you are looking to be employed in the financial sector.

Theoretically, there shouldn’t be discrimination towards someone in Debt Review when it comes to employment opportunities.

A: It is very important to open a new savings account at a bank where you have no previous dealings. This is to prevent money grabbing by your current creditors.

Remember to inform your employer to pay your salary into your new, above mentioned, bank account. Also, note that it is your responsibility to cancel all current debit orders and advise the debit orders that will still go off about your new bank account details.

A: Firstly, Debt Counsellors, as stipulated in the National Credit Act (NCA), are not allowed to manage their clients’ money. Rather, the NCA requires that a Payment Distribution Company (PDA) handles the collection and distribution of funds of Debt Review clients.

The three main reasons why the statements differ are:

• Payments are processed at different periods. The PDA will distribute the funds to the creditors, and a couple of days after that the creditor applies the payment to the account.
• The PDA statements include the Debt Review fees (link to that FAQ), whereas the creditor statements do not.
• Creditor statements include the service fee whereas the PDA statements do not include creditor service fees.

Therefore, PDA statements should be seen as estimates. But, if a client is concerned about the difference in balance they should contact their Debt Counsellor to check if there are any discrepancies or issues that need to be addressed.

A: Due to the endorsement of the National Credit Act 34 (of 2005) in 2007, Debt Counsellors started their profession in the Debt Counselling industry. Debt Counsellors are required in terms of section 86(6) to conduct an assessment concerning the over-indebtedness of a consumer. Through the Debt Counselling or Debt Review process a Debt Counsellor, therefore, offers a responsible and regulated rehabilitation remedy to an over-indebted consumer or individual.

If the Court declares an individual as ‘over-indebted’ and the person goes under Debt Review, the Debt Counsellor needs to remain a person of trust and integrity. Typical tasks involve the following (but are not limited to): negotiating with creditors, taking care of the necessary registration processes and various behind-the-scenes administrative tasks.

A: The National Credit Regulator (NCR) is the ‘regulating body’ of the South African credit industry. The regulator was established by the National Credit Act No. 34 of 2005 (referred to as ‘The Act’).

The regulator aims to encourage the development of an accessible credit market – mainly involving underprivileged persons, low-income individuals, and isolated communities. Credit bureaus, credit providers and debt counsellors are regulated and required by the NCR to comply with ‘The Act’.

A: All credit agreements must be included in your Debt Review. The only exception is those credit agreements where the creditor has started legal action. But even then, you will have to let your Debt Counsellor know about the agreement so that it can be taken into account in your overall monthly budget.

(Very important. You have to disclose all your accounts to your Debt Counsellor, no account may be excluded.)

Furthermore, if you have a shared credit agreement (where you and your spouse, for example, both signed for credit) the person you share that agreement with will also have to apply for Debt Review with you in a joint application.

Regarding service agreements (like tax debt, municipal debt, school fees etc.). Usually, they are not included in your Debt Review, but still, need to form part of your overall monthly budget. There are however exceptions to this.

Each client’s debt and overall financial situation differs, so we would advise getting our free Debt Assessment where a DebtSafe Consultant will be able to determine how your Debt Review will be structured according to your various accounts and financial obligations.

A: The DebtSafe Head Office is situated at 42 Van Riebeeck Road, Mokopane, Limpopo.

DebtSafe does, however, operate nationally, so we can assist you anywhere in South Africa. With our extensive attorney correspondent network, we are confident we can help wherever you are situated.

A: Debt can only be written off by two means, namely Prescribed Debt and Reckless Lending.

Prescribed Debt

Debt has only prescribed if there has been no attempt by the credit provider to collect it or if no summons has been issued for the debt during the last 3 years. Also, if there has been no acknowledgement of debt during the last 3 years. If you have made any form of payment in the last 3 years it constitutes an acknowledgement of debt.

Prescription of debt is a defence; so, when the credit provider attempts to collect you can claim prescription as a defence. You will need to get an attorney to write a letter on your behalf to the respective credit providers notifying them that the debt has prescribed. If the debt has indeed prescribed already, the new Credit Amendment Act prohibits the prescription to be interrupted after 3 years.

The exception to the above-mentioned is Bond Accounts and Judgements – as the term for these are 30 years.

Reckless Lending

Reckless Lending is when a creditor has failed to conduct a thorough affordability assessment – as required by the National Credit Act (NCA) – at the time of giving the credit. It is also when the credit provider has given credit despite the fact that you did not understand the costs and obligations of the agreement, or when the credit agreement will lead to you becoming over-indebted.

At DebtSafe we offer the option to our new clients of conducting a Reckless Lending investigation.

A quick note about Credit Amnesty

Credit Amnesty was a once-off occurrence between April and June 2014 where the credit bureaus were forced to remove adverse information from credit records. In no way did Credit Amnesty write off people’s debt, it only removed outdated information from the credit records of people who have paid-up their debt.

A: Your monthly repayment plan’s instalment will depend on your individual debt profile. What affects your monthly instalment is:

• The amount of debt you have.
• The type of debt you have.
• Your income.
• Your essential living expenses.
• What we can negotiate with your creditors.

Your monthly instalment will be unique to your situation; therefore, we recommend asking for your free, no-obligation debt assessment. This will give you an estimate on what your instalments will be when in our program.

A: A CREDIT PROVIDER enters into a credit agreement by lending money or offering credit to a consumer. It is of utmost importance that a credit provider must be registered under ‘the Act’ (NCA) and, with the National Credit Regulator (mostly referred to as the NCR).

According to ‘the Act’ (NCA): “in respect of a credit agreement to which this Act applies, means –

a)         The party who supplies goods or services under a discount transaction, incidental credit agreement or instalment agreement;

b)         The party who advances money or credit under a pawn transaction;

c)         The party who extends credit under a credit facility;

d)         The mortgagee under a mortgage agreement;

e)         The lender under a secured loan;

f)          The lessor under a lease;

g)         The party who advances money or credit to another under any other credit agreement; or

h)         Any other person who acquires the rights of a credit provider under a credit agreement after it has been entered into;”

A: The National Credit Act (NCA) has been a subject of criticism due to its drafting and wording. The National Credit Amendment Act (NCAA) became operational on Friday, 13 March 2015 and contains the broadest changes to the Act to date.

A: The National Credit Act / NCA (also referred to as ‘The Act’) became fully operational on 1 June 2007. The Act aims to provide improved standards of consumer information and strives to promote a fair and non-discriminatory platform for consumer credit by regulating the process.

A: When you are in arrears with a credit agreement, the In Duplum rule regulates the amount that you are responsible to repay to that creditor. Its aim is to prevent the creditor from demanding an unlimited amount (unlimited interest) of repayment from individuals who have fallen behind on their credit agreement.

There are two In Duplum Rules:

1. The common law In Duplum Rule.
2. The statutory In Duplum Rule in section 103(5) of the Act.

1. The Common Law In Duplum Rule:

Your debt’s interest will stop to run when the total amount of the arrear interest has accumulated into an amount equal to the outstanding principal debt.

So in the common law In Duplum Rule the amount repayable is:

• The outstanding amount at the time when you fell behind on payments.
• And interest equal to the amount of the outstanding amount at the time when you fell behind on the payment.

(If you have been charged the maximum amount allowed and then repay some, but not all, of the arrears, interest could be charged again until the maximum amount is reached once more).

This rule applies to:

• Debt that isn’t a credit agreement.
• Credit agreements entered into before 1 June 2007.

2. The Statutory In Duplum Rule

This Rule takes the creditor’s initiation fee, service fee, interest, credit insurance, default admin charges and collection costs into account when calculating the maximum repayable amount.

So, the amount you will have to repay is:

• The principal debt that is still due at the time you fell behind on your payments.
• Plus the above-mentioned fees, which will be equal to the principal debt that is still due.

Please note, however, there is still a disagreement between Debt Counsellors and Creditors on how this rule should be enforced. Therefore, the enforcement of this rule will be problematic until a Court provides a judgement about the rule and its implementation.

A: A service agreement is an agreement where the service provider performs physical work (labour), services or responsibilities for or on behalf of the customer/consumer/client against compensation or payment.

Typical service agreements include gym memberships, phone, or data contracts, for example.

A: A Section 129 Notice/Letter gives you notice to either bring your payments up to date, or, that you should consider the help of a resolution agent, the consumer court, ombud with jurisdiction, or apply for a debt relief process, such as Debt Review, within 10 working days. If you fail to respond within ten (10) business days of receiving this notice, and you have been in default of twenty (20) business days already, your creditor(s) will proceed to take or institute legal action against you, the consumer.

A: The Credit Act requires that Debt Counsellors use an accredited Payment Distribution Agency (PDA) to manage their client’s money in order to prevent mishandling of funds which means your money stays safe.

Your accredited Payment Distribution Agency (PDA) handles the distribution of your money, and will also provide you with monthly statements.

A: Alternatively known as your Clearance Certificate.

This is your key to your new beginning and what you are working towards in your Debt Review. Your Clearance Certificate will be issued when:

• All your accounts listed under Debt Review have been settled.
• You are able to carry on with the original agreements you have with your creditors.
• All your accounts are paid up, except for your home loan (your home loan must be paid up to date as per your Debt Review agreement).

Your Clearance Certificate will be sent to you and the credit bureaus, who are then required by the National Credit Act to clear your credit record.

A: Alternatively known as the Cancellation Form.

Whether a Debt Review is cancelled voluntarily or involuntarily the National Credit Act (NCA) requires that a Debt Review Cancellation Form is completed.

There are serious considerations to make before cancelling your Debt Review. These include the following:

• A cancellation fee of 75% of the debt restructuring fee is payable if you have not yet paid your first instalment and your repayment plan has been calculated.
• The original credit agreement is re-established, and your credit providers are free to proceed to enforce their rights. This could lead to immediate legal action against you.
• You will not receive your Clearance Certificate that clears your credit record.
• It will be much harder to apply for Debt Review in the future.

A: Your Debt Counsellor will do an in-depth evaluation of your financial situation to determine whether you legally qualify for Debt Review.

Once your Debt Counsellor has completed the evaluation they will send out a Form 17.2 which then states whether you are over-indebted and whether you would benefit from Debt Review. This form is then sent to your creditors and the credit bureaus.

A: Once your Debt Review application has been completed your Debt Counsellor is required by the National Credit Act to let your creditors and the credit bureaus know that you have formally applied for Debt Review.

This communication is done through a Form 17.1 and is sent to your creditors within 5 business days after the completion of your Debt Review application.