Get Help With Your Debt

By Author: NCR Debt Counsellor
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The National Credit Regulator (NCR) was established as the regulator under the National Credit Act No. 34 of 2005 (The Act) and is responsible for the regulation of the South African credit industry. It is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints, and ensuring the enforcement of the Act.

The NCR is also tasked with the registration of credit providers, credit bureaux and debt counsellors; and with the enforcement of compliance with the Act.

Debt Counselling was introduced and enforced in 2007. This enabled over-indebted consumers to seek relief in accordance to the National Credit Act.

It is further also important to remember that creditors cannot take legal steps against a person (if their negotiated payments are upt to date) who is under debt review. A person under debt counselling may also not take any new credit or make new debt.

What is Debt Counselling

On 1 June 2007 the National Credit Act (NCA) came into effect. The NCA empowered over-indebted consumers by allowing them to apply for Debt Counselling.

Debt ...
... Counselling was introduced to provide a definite process for helping a customer with over indebtedness. The process provides a consistent system of debt restructuring, enforcement and judgement, which places priority on the eventual satisfaction of all responsibilities for the consumer's obligations under the credit agreements.

The process of Debt Counselling was developed to offer an option for consumers who cannot meet their monthly obligations under current credit agreements. Their available amount for debt repayments is calculated after all basic living expenses have been budgeted for. Basic living expenses get priority before making provision for credit repayments. Debt counselling provides you with more breathing space without getting into trouble with your creditors for paying less than the original instalments.

Debt Counselling can be summarised as a procedure where a person, who can no longer afford to meet all his monthly debt obligations, can apply with a debt counsellor to negotiate on his behalf with his creditors for reduced monthly repayments.

Debt Counselling Process

When a consumer applies for debt counselling, the debt counsellor will review and evaluate the consumer’s financial position in order to determine if the customer is over-indebted. A consumer is over-indebted when he/she cannot meet his monthly debt obligations after all his/her basic monthly expenses have been paid.

The debt counsellor will notify the consumer’s creditors that he/she has indeed applied for debt counselling. The debt counsellor will notify each creditor with a legal notice called a 17.1 Notice. From this moment creditors are not allowed to take any legal action. During the next 60 days, creditors must negotiate with the debt counsellor to determine a new repayment plan for the consumer.

If the debt counsellor determines, during the debt review process, that the applicant appears to be over-indebted, he will commence with a procedure to notify all the consumer’s relevant creditors of this conclusion. This is done with another legal notice called a 17.2 Notice. The 17.2 Notice will give confirmation of over-indebtedness and the new repayment proposal will be sent to the creditors.

The debt counsellor will then, on behalf of the applicant, enter into a process of negotiation with these creditors in order to negotiate reduced (more affordable) monthly repayments on behalf of the applicant. Reductions of as much as 60% can be seen. There are however no definite guarantees.

All debt counselling applications end in court. This is to get a consent order for the new agreement. The consent order insures that the creditors stay to the new repayment arrangement and may not take legal action. It also gives the creditor peace of mind that consumer will keep to the new arrangement to pay each month and not skip or short pay on monthly repayments at any time.

The debt counsellor must get a court date within the first 60 working days of the debt counselling application. The debt counselling application will not be finalised until the consent order is granted. In many instances there is a big backlog in Magistrates Courts, so the chances are good that the court date will not be within 60 days. It is however the Debt Counsellor's duty to ensure that the date is obtained before the 60 day expiry.

The intention of the NCA was not that all applications end in court, but because of a new directive in 2009 this has changed. This has caused that applications take much longer than the initial 60 working days intended by NCA.

The consumer starts making payments from the first pay date after the application. All consumers are protected after the 60 working days as long as monthly payments are made to the Payment Distribution Agency. Creditors may not cancel the debt counselling after the 60 working days as long as the consumer keeps to new repayment plan.

Debt Counselling Fees

Consumers pay no application fee when they decide to make use of NCr Debt Counsellor.co.za. Some unscroupolous debt counsellors will charge more than R50 for the application, but this is illegal. All debt counselling fees are governed by the NCR.
The first fee is the restructuring fee. The restructuring fee is equal to the first payment that a customer makes to the Payment Distribution Agency (PDA) or a maximum of R 6 000.00 excluding VAT. Joint applications also have a restructuring fee limit of R6 000.00.
The second fee is the legal or court fee. All applications end in court, so a court file is prepared for the case. The legal fee is limited to a maximum of R 750 for a consent order. If consent cannot be obtained from all creditors this fee may be higher. We will provide you with a quote for all extra charges. Your legal fee will be included in your monthly payments to the PDA and the attorneys will be remunerated monthly.

The aftercare fee is an ongoing monthly fee that is payable every month as long as you are in debt counselling. The aftercare fee is 5% of the PDA distribution amount to a maximum of R400.00 (excl. VAT) per month.

A Rejection Fee of R300 will be charged, should you decide to withdraw from the process in the period between signing Form 16 and the completion of the restructuring negotiations by the Debt Counsellor. You will become liable for the payment of this fee immediately after withdrawing from the process.

75% of Restructuring Fee: Should you wish to withdraw from the process after the debt counsellor has already completed the restructuring negotiations, a fee equal to 75% of the restructuring fee will become payable by you.

NB! All fees are paid by the PDA to debt counsellor. So the fees come out of the distribution amount paid over each month by customer. In other words the customer does not have to find the funds to pay us. The customer simply pays the PDA what he/she can afford to pay each month. And this amount is worked out when we do the budget.

Please watch out for Debt Counsellors insisting that you pay the restructuring fee or your monthly debt payments directly to them. A Debt Counsellor may never receive any money from you, apart from the normally charged R 50 application fee.

There are only five accredited Payment Distribution Agencies. Please make sure that your payments go to one of these. Click here to see a list of registered PDAs.

Debt Counselling
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