Debt Review (also referred to as Debt Counselling or no-loan Debt Consolidation) offers a sustainable, legal ‘get-out-of-debt’ solution for many over-indebted South African consumers (that still receive a stable income). Since a consolidated and reworked debt repayment plan makes life affordable, clients can take care of their living expenses and go on with life while paying off their debt.
Debt counsellors may differ in taking care of the finer detail of the Debt Review procedures but trained, registered advisors take severely indebted consumers from rock bottom to reaching financial freedom again. The Debt Review process (in line with the legislation of the National Credit Act – “The NCA”) starts with the consumer approving the process and completing the application form (Form 16). The process then goes on to various administrative intensive procedures that take place (and are handled by the registered debt counsellor), and finally, the issuing of a clearance certificate (Form 19) by the National Credit Regulator (NCR) to complete the process.
Regarding the above, many consumers do, however, continue to believe certain misconceptions about Debt Review. Unfortunately, it reflects a distorted and pessimistic view of who debt counsellors are, what they do and the valuable solution they offer. DebtSafe asked a few of its many debt-free clients to comment on their experiences during their time under the Debt Review process. And with regards to the feedback provided, debt advisor and spokesperson Carla Oberholzer debunks some common myths consumers tend to believe about a debt counsellor and the Debt Review process:
- “All debt counsellors operate the same.”
Oberholzer highlights that every registered debt counsellor has their own set of procedures, values and outlook when assisting individuals with the Debt Review process. Debt counsellors should therefore not be generalised, and consumers should not assume that all South African debt counsellors operate similarly.
Oberholzer mentions that although the NCR regulates the Debt Review process, each Debt Review firm and its employees are unique in the way:
- They handle client communications and engagements.
- They position their brand in the market.
- The bells and whistles that are added to procedures. In other words, how the behind-the-scenes processes/systems flow and differentiate each Debt Review entity.
- Employees add value to their clients’ situations and how they handle statutory and procedural requirements.
- The core values, systems and approach are integrated into the overall procedure and experience to help solve clients’ debt burdens.
When selecting a debt counsellor, a consumer needs to pick someone who speaks to their core values and with whom they can relate as an individual. In addition, clients will be building a close relationship with their debt counsellors and might be dealing with them for a few years. It is for this reason that their selection is essential.
- “No one can learn from the Debt Review process.”
To quote a debt-free consumer: “What I have learnt through the Debt Review process is that you have to save money where you can. And don’t spend more than you earn.” Oberholzer ensures consumers that there is a lot to learn during the Debt Review process – from managing future finances to how one can appreciate financial freedom again. The journey of the Debt Review process establishes a behavioural change regarding a consumer’s finances. The effect of Debt Review can be pretty drastic (to start using a budget, for example), but what the consumers gain or what they will achieve (financially) is priceless.
- “Debt Counsellors just want to make money.”
Registered debt counsellors provide various skills and services to ensure their clients attain a clearance certificateat the end of the Debt Review process. The tasks involved can include the following: consolidating debt into one affordable/reasonable and reworked instalment amount that gives a client immediate cash flow relief (and differs from person to person), dealings and negotiations with credit providers and keeping them off the client’s back, implementing a reasonable payment plan, protection against a vehicle or house repossession and also enabling clients to continue to provide for their family’s necessary living expenses.
Debt counsellors are always on the lookout for how they can save the consumer more money. But on the other hand, Debt Review is extremely administrative intensive. The amount of work that needs to be done to set a client on their merry debt-free way is staggering.
From the application process to negotiations, to correspondence and proposal acceptances, to court orders, dealing with ad hoc creditor issues and arrangements to ensure the clients receive their clearance certificates. Please note that the NCR confirms and regulates Debt Review fees, and debt counsellors cannot simply ask what they want. Plus, an appointed (and registered) Payment Distribution Agency (PDA) works with clients’ monies towards creditors – note, NOT the registered Debt Counsellor.
- “One cannot get credit after Debt Review.”
Credit applications can’t be denied because of someone’s Debt Review history. But, according to Oberholzer, once a consumer has been issued a clearance certificate, they can slowly but surely rebuild their credit score again to apply for a home loan, vehicle finance and other credit-related applications.
Debt Review as a sustainable solution to help fix over-indebtedness has a ‘rehabilitative spirit’. The aim is to get clients credit active again but responsibly. Numerous clients who went through the Debt Review process successfully applied for credit again. **If a credit provider denies credit access, a consumer has the right to receive an explanation as to why the credit has been declined.
- “Debt Review can’t help protect someone’s house or car.”
According to Oberholzer, through provisions detailed in the National Credit Act, Debt Review offers protection against repossession of one’s assets. The Debt Review process allows clients to repay their debt, including home loans and vehicle finance (secured debt), without losing their assets. Once an individual enters the Debt Review process, all credit providers are prohibited from taking further action against them on the account that the debts be included in the Debt Review programme. Take Mr Geldenhuys, for example: “… my debt counsellor prevented that I lose any assets.”
A car, for example, cannot be repossessed by credit providers whilst the consumer is already under Debt Review. The only way credit providers are allowed to take a vehicle (for example) is if a consumer has signed a letter in which they voluntarily surrender the asset or if a legitimate court order of the high court has been presented. These are the only ways consumers’ may lose their assets.
- “Easy come, easy go.”
A debt-free client admits: “In the beginning, it was hard to get used to and be under the process, but then it became easier.”Managing severe debt is not as easy as counting one-two-three. Still, with the assistance of a registered debt counsellor, clients are given room to breathe during the recommended Debt Review process. At the same time, various procedures and negotiations are implemented on their behalf. The structured, legal process enables consumers to pay off their debt in one affordable and reworked monthly payment. Therefore, clients should be committed to biting the short-term bullet to be debt-free in the long run.
Managing debt (that has spiralled out of control) is not the easiest or fastest of processes to take on. But if and when consumers find themselves in a stressful and unavoidable over-indebted position, registered debt counsellors are there to assist and point them in the right direction to – in the end – regain financial freedom again.