Archive for the ‘Debt Counseling The Answer’ Category
Debt Counseling the Answer
February 3rd, 2012 | 
Author: 
Many people who seek debt counselling are clients of the “big four” banks, but have reached their credit limit with them and so approach second-tier lenders for loans at escalating credit rates. He said that with the income outlook being so bleak this year, many people are coming to terms with the fact that they cannot sustain their increasing debt.
Credit providers are also starting to use debt counselling to cut their losses and avoid having to repossess houses and cars, which then have to be resold, usually at a loss. Debt- counsellors using the debt counselling rules system have effectively been given mandates from the credit providers to extend loan periods and reduce interest rates to zero if necessary to get clients debt free in 60 months.
About 11 million of the 18 million credit-active consumers in South Africa are in arrears.
Debt Counselling Fee Guidelines:
http://www.ncr.org.za/pdfs/Guidelines/2011/Debt_Counselling_Fee_Guidelines.pdf
1. The Debt Counsellor may receive the following amounts in respect of consumers who
have applied for debt counselling:
1.1. An application fee, limited to the amount prescribed in terms of Schedule 2 (2) of
the Act, recoverable directly from the consumer upon receiving an application for
debt review;
1.2. A rejection fee of R300.00 (excluding VAT) in respect of consumers whose
applications have been rejected in terms of section 86(7)(a);
1.3. A restructuring fee of the lesser of the first instalment of the debt re-arrangement
plan or a maximum of R6000.00 (excluding VAT), in respect of a consumer whose
applications have been accepted in terms of 86(7) (b) or 86(7) (c). (Should a joint
application be required, the fee can be increased to a maximum of R6000.00
(excluding VAT).)
1.3.1. 100% of the fee is payable at the first instalment.
1.4. Should a Debt Counsellor fail to submit proposals to Credit Providers or refer the
matter to a Tribunal or a Magistrate Court within 60 business days from date of the
debt review application the Debt Counsellor has to refund 100% of the fee paid by
the consumer (excluding the application fee).
1.5. A monthly after-care fee of 5% (excluding VAT) of the monthly instalment of the
debt re-arrangement plan up to a maximum of R400.00 (excluding Vat), for a period
of 24 months, thereafter reducing to 3% (excluding VAT) of the monthly instalment,
to a maximum of R400.00 (excluding VAT), for the remaining period of the debt rearrangement plan.
1.5.1. Payment of the monthly after-care fee is to commence in the 2nd month after
the amount in 1.3.1 above has been paid.
1.6. Should the consumer withdraw from the process after completing stages 1.3 above,
a fee equal to 75% of the restructuring fee as per 1.3 above is payable by the
consumer.
1.7. A legal fee for a consent order of R750.00. The legal fee for the consent order may
only be deducted in the 2nd month after the amount in 1.3.1 above has been paid.
If the consumer’s affairs cannot be resolved through a consent order, and there are
additional costs for further legal processes, these need to be separately negotiated
with the client. The Debt Counsellor should be able to produce proforma invoices
issued to them by their lawyers for legal services, when so requested by the NCR.
1.8. The applicable fees and related debt counselling services will be set out in an
addendum to Form 16, which needs to be explained to the consumer and signed by
him/her.
1.9. The above fees will become effective from 01 August 2011. COMPARISON BETWEEN CURRENT DC FEE GUIDELINES AND APPROVED DC FEE GUIDELINES
DEBT COUNSELLIG FEE GUIDELINES Current Fees Approved Fees
1. A Debt Counsellor may receive the following fees in respect of consumers who have applied for debt
counselling:
1.1. An application fee, limited to the amount prescribed in terms of Schedule 2 (2) of the Act, recoverable
directly from the consumer upon receiving an application for debt review;
R 50 R 50
1.2. A rejection fee of R300.00 (excluding VAT) in respect of consumers whose applications have been
rejected in terms of section 86(7)(a);
R300 (excl VAT) R300 (excl VAT)
1.3. A restructuring fee of the lesser of the first instalment of the debt re-arrangement plan in respect of a
consumer whose applications have been accepted in terms of 86(7) (b) or 86(7) (c).
• Maximum allowable fee for a Single Application (Once off) R3000 (excl VAT) R6000 (excl VAT)
• Joint Application (Once off) R4000 (excl VAT) R6000 (excl VAT)
1.3.1. 100% of the fee is payable at the first instalment. Yes Yes (no change)
1.4. Should a Debt Counsellor fail to submit proposals to Credit Providers or refer the matter to a Tribunal
or a Magistrate Court within 60 business days from date of the debt review application the Debt Counsellor
has to refund 100% of the fee paid by the consumer (excluding the application fee).
100% 100%
1.5. A monthly after-care fee payable to the DC 5% up to a max of R300 (excl
VAT) for the first 24 months,
thereafter reducing to 3% to a
max of R300 (excl VAT).
5% up to a max of R400 (excl
VAT) for the first 24 months,
thereafter reducing to 3% to
a max of R400 (excl VAT).
1.5.1. Payment of the monthly after-care fee is to commence in the 2nd month after the amount in 1.3.1
above has been paid.
Yes Yes (no change)
1.6. Should the consumer withdraw from the process after completing stages 1.3 above, a fee equal to
75% of the restructuring fee as per 1.3 above is payable by the consumer.
Yes Yes (no change)
1.7. Legal Fees To be disclosed upfront and
recovered from the Consumer
and agreed to in writing
A legal fee for a consent
order of R750. Any additional
legal fees to be negotiated
separately with the consumer
and the DC must be able to
produce pro-forma invoice
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