[Rek jou cheque] Don’t let debt get you down: Counselling is a proven way for mense to get help
Consumers have the right, and choice, to improve their finances.
According to the National Debt Counsellors Associations (NDCA) debt counselling is a proven, effective way for consumers in financial difficulty to get help.
And although more are choosing it as their preferred way to repay debt, many misconceptions remain.
The NDCA states that there are currently over 250 000 South Africans who have chosen to use debt counselling to improve their finances in the long term, with monthly new applications around 12 000 to 15 000.
These monthly applications emanate from many more inquiries each month, the majority of which end up with debt counsellors providing free advice to consumers, which assists them in managing their finances without debt counselling.
The 250 000 consumers who are in debt counselling repay some R15 billion to creditors annually.
The industry is facilitated by a world-first and only-one-of-its-kind payment distribution system that allows for efficient collection and distribution of the repayments, 90% of which goes directly to pay down consumer debt.
In other countries, the debt repayment mechanisms are not as efficient and only 60-70% of collected amounts end up towards paying down consumer debt.
Debt counselling is responsible for around 10,000 direct jobs in an important ecosystem that includes lenders, debt counsellors, credit bureaus, PDAs, technology providers, legal practitioners, regulating bodies, and others.
Since 2008, many South Africans have chosen debt counselling, as enshrined in the National Credit Act, as the method to repay back their debt.
“Despite this, education about debt counselling from financial services institutions has been non-existent since inception,” says NDCA chairman, Benay Sager.
He says this is unfortunate as some of what’s being said about debt counselling needs to be clarified:
Debt counselling is for “debt reorganisation in cases of over-indebtedness” as articulated in the National Credit Act. This means anyone facing or about to face difficulty in paying back credit could apply for debt counselling.
Almost all consumers in South Africa are multi-banked, so behaviour with one institution cannot be extrapolated: they may be up-to-date with accounts with one institution, but that does not mean they are up-to-date with accounts with other institutions.
Debt counselling is voluntary, and the record is expunged once the process is completed.
The costs are built into the programme. Over ninety percent of what gets paid back goes to lenders and credit providers.
The NDCA recommends that consumers considering debt counselling:
Check if the debt counsellor is registered on the National Credit Regulator database:
www.ncr.org.za/register_of_registrants/index.html
Ask if they are a member of a credible professional body or association.
Confirm with the debt counsellor that they are using one of the four registered payment
distribution agencies: these are Hyphen Technology, DC Partner, Intuitive, and CollectNet.
Ask them to explain the process, how long it will take and what client-service support they provide.
Sign up only after a full, free assessment is done.
Sager says the debt counselling sector in South Africa is world-class, and the number of people receiving their clearance certificates has increased tenfold since 2016.
“Consumers have the right to choose a method to repay debt. It is a choice enshrined in the Constitution and the National Credit Act.
“Debt counselling is an effective way to do this because it costs less than alternative methods. In fact, debt counselling is the most pro-consumer option to repay debt for responsible consumers who are unable to do so because of their financial circumstances.”
Sarfaraaz Hamza, CEO of ezDebt, says that as we head into October—which is Mental Health Awareness Month—we have to acknowledge the monumental effect overwhelming high levels of household debt are having on South African consumers.
“Whilst interest rates and petrol prices have dropped, it isn’t enough to ease the burden of debt repayments. Financial distress in the home almost always spills over into other sectors of life. Relationships with spouses and children can become negatively affected, and many suffer from anxiety and depression because of their debt and hounding creditors.”
Hamza also notes that too many South Africans are in denial about the state of their over-indebtedness, and then miss the timeframe to make use of debt counselling as a debt relief option.
“It is best to make contact with a registered debt counsellor as soon as you feel strain in maintaining your monthly repayments.
“Avoiding your creditors is never a good idea. It is better to acknowledge that there is a problem and seek help.
“It is important to note that you only have 10 days after a Section 129 has been issued by your creditor, to go the route of debt review. It may not solve everyone’s debt problem, but it has helped hundreds of thousands of South Africans, and that cannot be dismissed,” says Hamza.
Debt counselling is a very contentious industry in South Africa. People either love it or hate it.
In my experience, it has all to do with the debt counsellor they are with. Please watch out for “fly-by-nights” and those promising to perform miracles with your debt.
Ask as many questions as you need to and don’t sign up for anything until you are 100% sure that you know all you need to, and that you are willing and committed to the process.
dailyvoice@inl.co.za