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FAQ about Debt Counsellors and the Review Process in South Africa

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Debt Review

FAQ about Debt Counsellors and the Review Process in South Africa

Some of the frequently asked questions about debt counsellors and the debt review process are briefly answered below.

Is debt review a type of loan?

No. It is a process whereby you can settle your debts, through the consolidation of all the monthly amounts payable to the creditors into a single and lower monthly instalment, over an agreed upon period. It leaves you with enough money to pay for the basic monthly living expenses.

What is the role of debt counsellors?

The counsellors negotiate, in good faith, with the creditors on behalf of the consumer client to restructure the monthly repayment amounts. A magistrate’s court order enforces the agreement between the creditors and the consumer.

Can anyone act as a debt counsellor?

No. The counsellor must be registered with the National Credit Regulator and must have completed a course in debt counselling, and have passed the assessment, which is in the form of a written exam. The National Credit Regulator monitors the activities of the counsellors, in order to ensure that they act within the prescribed guidelines.

Is debt counselling and debt review the same thing?

The two terms are used interchangeably, but counselling also involves debt management assistance in the form of liquidation, administration or sequestration. The counsellor can also assist the consumer in applying for a debt consolidation loan. Debt review is specifically the process of determining whether the consumer is over-indebted, and if so, the negotiation with the credit providers for lower repayment amounts and the setting up of the agreement, as well as overseeing the monthly repayment.

What documents are required?

For the application process, you will need to submit a copy of your ID document, marriage certificate, two months personal bank statements and salary slips. If you are self-employed, you will need an affidavit or letter from an accounting officer to confirm your monthly income, since you cannot undergo debt review if you do not have a monthly income. You will also need to provide copies of the most recent account statements, which show the total debt for each account, the monthly instalments and outstanding balances. If you have received a letter of demand, you should make a copy and also submit such.

What are the main functions of the debt counsellor, other than negotiating on behalf of the consumer?

The counsellor may not provide financial advice that is not directly related to the consumer’s debt. The counsellor must be registered with the Financial Services Board as a financial advisor, if he/she wishes to provide financial advice regarding the purchasing of financial products, investments, loans linked to investments and the termination or variation of financial products. The National Credit Act Section 86 regulates the role of the counsellor and stipulates that the counsellor can only provide guidance regarding indebtedness and debt restructuring. The counsellor is not allowed to interfere in the finances or any of the consumer’s affairs. He/she can only review the indebted status and handle restructuring of the debt, based on the consumer’s application. The counsellor can provide a consultation to determine the nature of the consumer’s debt and to determine whether restructuring is possible or applicable. The counsellor may recommend an administration or sequestration, if the situation requires such and all other options have been exhausted.

What if the application for debt review fails and the counsellor determines that the consumer is not over-indebted; does the consumer still have to pay a fee to the counsellor?

The cost of application is R50. If the counsellor determines that the consumer does not qualify for debt review and rejects the application, a fee of R300 excluding VAT is payable.

When can a credit provider withdraw from the debt review agreement?

If the credit provider does not accept the proposal for a lower amount and there is no court order in place, the credit provider can withdraw. If the consumer pays short on the agreed-upon amount, even if it is as little as R20 less per month than agreed, and if the consumer fails to make the monthly payments on time, then the credit provider can withdraw and the arrears become payable.

What should be the first step if I want to apply for debt review?

Complete the free online assessment and have one of our consultants contact you, or contact us for immediate assistance.