Debt Counselling South Africa

To address the growing credit market and consequently the growing debt epidemic among consumers, the government of South Africa implemented the National Credit Act. It was introduced to promote the economic and social welfare of all South Africans, promote a fair and transparent credit market, protect consumer and their rights in the credit market, regulate all credit providers, debt counselors and credit bureaus, limit the cost of credit and level the playing fields between credit providers by standardizing the way in which credit is granted.

One of the purposes of the act is to assist over-indebted consumers to restructure their debt. Debt counselling South Africa is the path this particular purpose of the act is realised.

Consumer Rights When In Credit and Unable To Pay

There are instances when an individual fails to meet the agreed upon monthly payment with a lender. The National Credit Regulator have stipulated in a document consumer rights that credit providers are still expected to recognize in the event a consumer is unable to repay in terms of the credit agreement.

If your account is 20 business days in arrears, then it is said that you are in default or you have defaulted. The correct procedure to be taken by your credit provider is to issue a notice letting you know of the default to draw your attention. This is in accordance with Section 129 of the Act.

In the notice the credit  provider  must  propose  that  the  consumer  refer  the  credit agreement to a debt counsellor or a consumer court or an Ombudsman with the authority to handle any possible disputes. The purpose of such a referral is to enable the consumer and the credit provider to resolve the matter or agree to a plan to bring the repayments up to date.

Now if you fail to approach your credit provider or an Ombudsman within 10 days to resolve the matter, the credit provider can take further steps to enforce the debt.

Do know that there are prohibited collection and debt enforcement practices. A credit provider is not allowed to retain any of your identity document, debit or credit card, ATM card, or PIN number for purposes of collection or debt enforcement.

The Right To Apply For Debt Counselling

There are 3 ways an individual can seek help by availing of debt counselling services. A consumer may approach a debt counselor voluntarily, be referred by a credit his/her credit provider upon the issuance of a written notice of default, or be referred by a court.

Over-indebtedness is the sole factor a consumer can apply for debt review. A consumer can only be determined over-indebted by a debt counselor (after complete assessment) or by a court.

Although a consumer has the right to apply for debt restructuring, this does not mean that he /she will automatically qualify for the service. After assessing the consumer’s financial status, a Debt Counsellor may conclude that the consumer is not over-indebted. The Debt Counsellor must then issue the consumer with a letter of rejection.

Being issued a letter of rejection is not the end of the road though. You may still approach a court within 20 business days upon receiving the letter and request for a declaration of over-indebtedness by the court. You may also request the court to declare the existing credit agreement with your lenders reckless and order a debt restructuring. Only a court can declare an agreement reckless on the request of either the debt counsellor or the consumer.