Debt Relief Measure for Over-Indebted Consumers – South Coast Herald
Debt counseling was introduced by the National Credit Act as a voluntary debt relief measure to help over-indebted consumers.
A consumer is over-indebted when their income is insufficient to cover all living expenses and debt repayments. Various circumstances such as job loss, reduced income, illness, death, rising cost of living (gasoline increases, food price increases, electricity etc.) and others are often the main causes of consumer over-indebtedness.
Consumers facing financial distress should not ignore their debt obligations, they must contact lenders and share their financial situation and negotiate appropriate repayment options.
If that attempt fails, consumers are encouraged to consider debt counseling and contact a registered debt counselor who will negotiate reasonable repayment terms on their behalf, based on the loan providers the consumer can afford, Advocate Kedilatile said Legodi, Manager: Debt Counseling at the National Credit Commission (NCR).
Legodi said the concept of debt counseling is often misunderstood by many, causing consumers to miss out on the benefits and protections that debt counseling offers.
In addition, Legodi says, there are a large number of false and deceptive debt counseling marketing practices that have been identified by the NCR either online, on social media, or over the phone, with the sole intention of exploiting unsuspecting and financially distressed consumers. Some of these marketing practices promise a percentage of debt reduction (even before a financial assessment), savings, or consolidation.
“If it sounds too good to be true, it probably is. Consumers are advised to be aware of false and deceptive practices and not to become victims, especially when approached. Understanding the debt counseling process from start to finish, the implications, the fees incurred, when, where and how to pay those fees, the different steps of the process, the deadlines required, the provisions on how to opt out of debt counseling and others are important elements that the consumer needs to know before signing the dotted line,” said Legodi.
The manager said debt counseling is only provided by an NCR-registered debt counselor, adding that debt counselors are registered as individuals and not as a legal entity/corporation for the purposes of the National Credit Act.
She added that a financially distressed consumer who seeks the services of a debt counselor must ensure that they are aware of all the details of the debt counselor’s offer of assistance. This includes the first and last name of the debt counselor, the location of the practice, and the NCR registration number, which is assigned by the NCR upon registration.
Even if the debt counselor operates under a company/trade name, the consumer has a right to information. Legodi said a consumer is considered to be under debt counseling if they have sought debt counseling in a prescribed manner, as set out in the National Credit Act.
She added that there is a difference between debt counseling and debt consolidation, saying that debt consolidation offers the consumer a loan to pay off any debt.
“This will result in the consumer’s multiple payments being reduced to a single monthly payment to the lender that originated the consolidation loan. If you are approached and offered debt advice, insist on getting clarity from the caller as to their source of information or where they obtained your contact information, and do your homework first before accepting the offer. Debt counseling doesn’t cancel debt, it helps consumers with disposable income make reduced payments without having to borrow more money. Paying smaller amounts through debt counseling may take longer to pay off your debt and it will take you longer to pay off your debt,” she said.
She added that if consumers want to file a complaint against a debt counselor, credit provider, credit bureau or payment distributor, they can send the complaint to them [email protected]
Legodi said: “To obtain a list of registered debt counselors who operate closer to work or residential areas, consumers are advised to visit www.ncr.org.za. In the current economic climate, many consumers will no doubt find it difficult to manage and manage contractual repayments. Please don’t despair, be proactive, don’t pressure yourself, address your financial difficulties by finding out more information about the debt counseling process and gaining thorough understanding because an informed consumer is a protected consumer.”
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