Debt education is an important life skill that most of us did not have the privilege to acquire when growing up. Fostering knowledge about debt, its causes, its solutions and how to react to events that directly influence your debt forms part of this skill set.
It is never too late to learn and change your financial legacy. Educating yourself on how to budget, or how to manoeuvre through a cash flow crisis, or how to build healthy financial habits will cultivate the skillset to achieve financial freedom.
Explore the Debt Education topics below to take back power over your finances and end the vulnerability caused by over-indebtedness.
A: A credit agreement is a contract/agreement between a consumer and credit provider in which a credit provider offers a product or monies to the consumer. According to the National Credit Act (NCA) the consumer has to be given a contract (that explains the terms and conditions of the agreement) and a quotation (disclosing the total amount/fees payable under the specific agreement) by the credit provider on acceptance of the agreement.
The Act also defines a credit agreement as:
a) a credit facility,
b) a credit transaction,
c) a credit guarantee, or
d) any combination of the above.
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: 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.
Q: What Can You Do If You Have No Debts, Regularly Get Declined When Applying for Credit, and Want to Improve Your Credit Score?
A: It is your RIGHT to ask the relevant creditors (that declined your application) for insight into why the application was rejected.
And, you have the RIGHT to pull one free credit profile per year, investigate your credit profile and make sure that there are no irregularities on the profile that might affect your credit score in a negative manner.
A credit profile shows the credit providers what your credit health is as well as how you manage your credit/pay credit agreements.
It is, unfortunately, true that without a credit record the institutions cannot see that you are a good ‘payer of credit’, especially on a large amount.
Our advice as debt industry leaders will be to open a credit agreement (for example, a credit card or store card) and build your credit record in a controlled manner.
Keep in mind that while trying this method, you should always regulate your income, expenditures and debt amounts.
Good luck with (slowly but surely) building a good credit record. And, continue to sustainably manage your debt the way you have already set forth.
A: Many South African consumers are under the impression that the term ‘blacklist’ still exists, but there is, in fact, no such thing anymore. The word ‘blacklist’ should rather be replaced with the following: consumers that portray or have a bad credit record/profile.
The word ‘blacklist’ is sometimes evident in marketing campaigns to ‘frighten’ consumers. The word or concept has not been in use for a while now and this informal term was used during a time when credit bureaus only kept negative data or information on record about consumers’ ‘credit behaviour’. These days positive data also appears on a person’s credit profile.
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: 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: Yes, you definitely can – don’t feel intimidated by creditors; you have the right to negotiate with them if you anticipate that you will be having trouble repaying your debt. Plus, being proactive will count in your favour.
Before getting everything ready for your negotiations, take the following into account:
- Each creditor will want as much as possible. So you will have to show them that you truly only have a certain amount available and that your offer is reasonable considering your financial situation.
- Most creditors will not be able to accept a pro rata amount on certain accounts (like a vehicle loan or home loan) and may require more than the pro rata amount in order for them to justify that you keep that asset.
- Each creditor will have to be approached individually.
What you need before approaching your creditors:
- A written motivation describing how your financial situation has changed, leaving you in a position where it is necessary to make new arrangements on your credit agreements. Also, add how you have tried your best to keep up with the payments by cutting out unnecessary costs.
- A comprehensive budget that shows your cash flow exactly. On this budget, you need to show what money is coming in, and what all your expenses are (debt repayments, service agreements and essential living costs).
- Calculate how much you can pay each creditor. During this calculation, you will need to prioritise the most critical accounts (like your home loan, car loan, rent etc.)
- Decide for how long you will need leniency on your payments (remember, negotiating for a better repayment plan is only a temporary arrangement, like a few months, and not an option long-term)
- Compile a repayment plan that specifies how much you propose to pay during the leniency period, and how you plan to catch up with the payments after the leniency period is done.
When you have the above in order you can draft a proposal for each creditor. Your proposal will contain your motivation, your calculations for that specific creditor and your proposed repayment plan for that specific creditor. Then, make an appointment with each creditor and present your case, point for point.
As mentioned above, this arrangement with your creditors is only a short-term solution, your creditors will not agree to a long-term repayment adjustment. So if you see that you will need reduced instalments for the foreseeable future you should consider Debt Review which will most likely be a better debt solution.
Learning how to negotiate with your creditors, budgeting, or how to manoeuvre through a cash flow crisis is all part of building healthy financial habits, which will develop the skills you need to accomplish financial freedom.
Click here to explore more Debt Education topics and improve your financial skillset.
A: Yes, you can.
Surrendering your vehicle while your payments are still up to date:
Contact the creditor and give them a written notice that you want to surrender your vehicle. In five business days, you will have to surrender the vehicle to the creditor. Within ten business days of receiving your written notice, the creditor is required to provide you with an official evaluation of the vehicle (stating its value). The creditor will then sell your vehicle. If the creditor sells your vehicle for less than you owe on the car you will be responsible to pay the outstanding amount.
If you are dissatisfied with the evaluation provided by the creditor you can withdraw the notice and recommence the possession of the vehicle. You can also sell your vehicle privately to get a better price.
Surrendering your vehicle when you are behind on payments:
You can inform your creditors that you want to voluntarily surrender your vehicle. Once you signed the voluntary agreement your car will be repossessed.
When you surrender the vehicle during the debt review process – the correct procedure will be to suspend further payments to the creditor until the shortfall amount, if any, has been established. Whereupon, depending on the circumstances, repayment can continue.
A: Debt can only be written off by two means, namely Prescribed Debt and Reckless Lending.
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 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: You can log a dispute directly with the credit bureau where the wrong information is listed on your record.
If the wrong information is because of a specific creditor you can log a complaint with the Credit Ombud to dispute the listing on your record.
A: You are insolvent when your liabilities are more than your assets. When considering your assets, you include all income, properties, vehicles, cash in the bank, investments etc. Liabilities are all your debt.
If you want to remain solvent, you must be in a position where your assets are more than your liabilities. When you are insolvent, you can apply for sequestration, which is a process where your assets are sold to offset your liabilities.
Usually, your creditors must get a specific percentage of the proceeds of the sale of your assets. After this, you will not be able to apply for credit for five years, after which you can apply for a rehabilitation order. There are alternatives such as Debt Review, which you should consider first before applying for sequestration.
A: First, we would recommend that you pull your credit record to see what it looks like and whether it is in good standing or not. It is also a good idea to check your credit record regularly to make sure everything is as it should be.
If you see that there are accounts whose status are in arrears you will have to pay the arrears, and then make sure that you keep up to date with those accounts going forward.
If you have Judgements or Administration Orders on your profile you will need to settle the outstanding debts in order to have that information removed.
Avoid applying at various creditors for credit in a short period of time, this will affect your score negatively. Furthermore, every time you apply for credit and it gets disapproved it also negatively impacts your credit record.
The best way to improve and keep your credit record in good standing is by paying the full instalment that is due on time every month and checking your credit record on a regular basis.
A: You can check your credit record with any credit bureau. There are mainly four credit bureaus in South Africa. They include; TransUnion, XDS, Experian and Compuscan.
By law, you are entitled to pull your credit record for free annually.
Fix Debt Safely
When debt has you backed into a corner, it is crucial to find a safe and reliable way to fix your finances. Jumping for a quick solution will only make the situation worse. Instead, take a moment to educate yourself about safe and sustainable debt solutions.
Read more on how DebtSafe ensures the safest solution to fix your debt.