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What does debt review entail? Debt Review, also referred to as Debt Counselling or Debt Consolidation, is an NCR-regulated program established under the National Credit Act. It provides legal assistance to over-indebted consumers in becoming debt-free. A Debt Counsellor evaluates the consumer's financial situation and restructures their debts through a payment plan (proposal) that benefits both the consumer and the credit provider. This process takes into account the consumer's essential living expenses and debt obligations.
What is the purpose of Debit Cancellation Forms? These forms allow the appointed Debt Counsellor to cancel all active debit orders on a consumer's credit agreements, ensuring no unnecessary deductions are made from the consumer's account during the process. To prevent any unwanted charges and complications with reversals, many Debt Counsellors advise consumers to switch their bank accounts.
What is the process for applying for Debt Review? To apply for Debt Review, any consumer who is over-indebted can complete an application form (Form 16). Clients who are interested can request a call back, and one of our experts will contact them within one business hour.
What is the responsibility of the National Credit Regulator? The National Credit Regulator (NCR) is responsible for overseeing the South African credit industry. This includes registering credit providers, credit bureaus, and debt counsellors, as well as ensuring compliance with the National Credit Act (NCA).
Can bonds and vehicles be included in Debt Review? Bonds and vehicles can be included in the Debt Review process and will be fully protected from any legal action, as long as no legal action has been initiated through the courts by the relevant creditor.
Can a client choose which accounts to include in Debt Review? As per Section 88 of the National Credit Act, all outstanding debt must be included in Debt Review to properly assist consumers in rehabilitating their existing debt.
In the context of Debt Review, what does the term 'proposal' mean? A proposal, or payment plan, is a negotiation tool provided by a debt counsellor to all listed credit providers after evaluating the consumer's income and expenses. This document outlines the consumer's available funds and proposes potential reductions in interest rates for all accounts included in the Debt Review.
Can clients apply for loans or credit while under Debt Review? To rehabilitate the current outstanding debt, the consumer will not be able to incur further debt. Once all debts are settled through the process, the Debt Counsellor will obtain the necessary paid-up letters and issue a Clearance Certificate (Form 19) to the relevant credit providers and credit bureaus, thereby clearing the consumer's credit profile.
In what situations can clients apply jointly? If a couple is married in community of property, a Debt Counsellor will need a joint application that includes the information and consent of both spouses to proceed with the assessment, as required by the Matrimonial Property Act.
Is it allowed for a client to rent property while under Debt Review? Yes, a Debt Counsellor can include a client's rental expenses in their budget and provide a letter specifying the amount the client can contribute towards rent each month.
In the case of a marriage in community of property, can a single application be made? When married in community of property, a single application cannot be submitted, as both consumers are legally responsible for each other's debt obligations, meaning they share one estate.
Does applying for Debt Review lead to the client being blacklisted? A flag will be added to the consumer's credit profile as a protective measure when applying for Debt Review. This is not considered blacklisting and will be removed once a Clearance Certificate is issued after successfully completing the process.
Is Debt Review and Debt Administration the same? No, Debt Administration is an older debt relief process regulated by the Magistrates Court Act, which applies only to debts up to R 50,000 and specifically excludes bond and vehicle finance. In our view, the instalments under Administration are often too low to cover the interest on accounts, with payments made every three months. On the other hand, Debt Review is a more modern debt relief process regulated by the National Credit Act, with no debt limit, allowing bonds and vehicle finance to be included in the process.
How can you verify if a Debt Counsellor is registered? To check if a Debt Counsellor is registered, visit the NCR Register of Registrants website here: https://www.ncr.org.za/register_of_registrants/registered_cp.php. Enter the debt counsellor's registration code (e.g., NCRDC3436, without spaces) in the search box to view their details and confirm their [Registered!] status.
If creditors take legal action, what notices will be sent? If creditors take legal action, they must send specific notices as required by the National Credit Act: • A Section 129 notice (prior to applying for debt review) notifies the consumer of their default, giving them 10 working days to resolve the issue before legal action is taken. It advises seeking help from a Debt Counsellor or another resolution agent to prevent further action. • A Section 86(10) notice (after applying for debt review) can be issued by credit providers if payment defaults occur during the debt review process. This notice informs both the consumer and the debt counsellor about the termination of the debt review process. Once issued, the account is no longer under debt review, and the consumer must negotiate directly with the creditor. The debt counsellor may attempt to have the account reinstated under debt review if the consumer can pay the arrears. • A Section 88(3) notice (after the debt review application has been made and an Acceptance is in place or a Court Order has been granted) can be issued by credit providers if payment defaults happen during the debt review process. This notice notifies both the consumer and the debt counsellor about the termination of the debt review process. Once issued, the account is no longer under debt review, and the consumer must deal directly with the creditor. The debt counsellor may try to have the account reinstated under debt review if the consumer is able to pay the arrears.
What does blacklisting mean? Blacklisting is a term often used to describe when a consumer is denied loans due to a poor credit rating. However, it's important to understand that there is no formal process for being "blacklisted."
What do Form 17.1 and Form 17.2 refer to? A Form 17.1, in the context of Debt Review, is an official document used by a Debt Counsellor to notify all listed credit providers that a consumer has applied for Debt Review. In contrast, a Form 17.2 Acceptance is used by the Debt Counsellor to inform all listed credit providers that the consumer has been found to be over-indebted, meaning their expenses exceed their income. If the consumer is determined not to be over-indebted, the Debt Counsellor will issue a Form 17.2 Rejection to inform the creditors and the National Credit Regulator (NCR).
Is it possible for clients to switch from one debt counsellor to another? Clients are allowed to switch to any debt counsellor they choose, but they are advised against doing so in an effort to save more money, as this could negatively impact their Debt Review application and may result in the termination of the process. The goal of Debt Review is to reduce the monthly instalment towards the debt, ensuring it covers interest and service fees. If the instalment is too low, it could lead to an increase in debt instead of a reduction, which could affect the application and potentially cause it to be terminated, forcing the consumer to make direct payments to credit providers.
What happens to the funds once an account has been settled? Once an account is fully paid, any surplus funds are released and redistributed to the remaining accounts to help settle the debt more quickly. This process is referred to as 'cascading'.
What is the role of a Clearance Certificate? The issuance of a Clearance Certificate (Form 19) marks the successful completion of the Debt Review process, confirming that the client has settled all debts included in the process. Once the Clearance Certificate is issued, all registered credit bureaus and credit providers are notified, along with the necessary proof, which will result in the removal of the Debt Review listing from the consumer's credit profile.
What is a Granted Court Order? A Granted Court Order is obtained to solidify all agreements between the debt counsellor and the relevant credit providers, effectively preventing any further action (unless legal proceedings have already started). This Court Order legally protects the consumer and their assets, shielding them from harassment by the creditors.
What does it mean to be terminated from Debt Review? A client’s Debt Review application can be terminated by the credit providers and the Debt Counsellor if: •Payments don’t align with the agreed plan. •The client refuses a counteroffer from a creditor without valid reason or proof. •The client fails to cooperate, such as not providing necessary documentation. •Default occurs without consulting the Debt Counsellor or providing proof. If a credit provider terminates the Debt Review, they will issue a Section 86(10) termination letter, notifying both the Debt Counsellor and the client. The client must then arrange repayment directly with the creditor, and the Debt Counsellor will adjust the budget accordingly.
What is a Suspension? It occurs when a Debt Counsellor suspends their services due to non-cooperation or missed payments. The Debt Counsellor will send an Intention to Suspend letter, giving the client 10 working days to resolve the issue. If not addressed, a final suspension will occur, and a Form 17.W will be issued to creditors. After suspension, the client must make payments directly to creditors, and the Debt Counsellor will remain on record until all debt is paid off, at which point a Clearance Certificate can be issued.
What are some effective ways to build a credit score from scratch? With a 0-credit rating, it's best to take small, careful steps. Consider opening a retail store account and make sure to pay it off in full and on time every month, without defaults or partial payments. Another option is to act as a surety on a debt agreement for a trusted friend or relative, which can help improve your credit score. However, it's important to be cautious when offering surety, as it could negatively affect your credit rating if the person defaults on the debt. By signing a surety agreement, you are agreeing to fulfill the obligations of the principal debtor (the friend or relative) if they fail to pay.
What is the role of debt collectors, and what happens when accounts are referred to them? Credit providers frequently hire debt collection agencies to recover overdue debts. These agencies are allowed to add interest from the date the Letter of Demand is issued to the consumer. To avoid having accounts referred to a debt collector, consumers should negotiate and stay in communication with their creditors. Failing to repay the outstanding debt could lead to legal action in court.
What are the consequences of a failed debit order? If a debit order fails due to insufficient funds, banks typically charge a 'penalty fee,' which is set according to the terms and conditions of the credit provider. These incidents can also negatively affect a credit score.
How does debt review affect a credit score? When a client applies for debt review, the debt counsellor works with credit providers to negotiate a lower repayment amount over a longer period. During the review process, the client is prohibited from taking on new debt, allowing the debt counsellor to focus on settling the existing debt. Once all debts are cleared, a Clearance Certificate is issued to the relevant creditors and credit bureaus.
What is the process for canceling debit orders after an application? The debt counsellor will provide the client with the required debit cancellation form(s) for completion. Once the forms are signed and returned, the documentation will be sent to the relevant creditors within 5 working days of the application. This gives the listed credit providers 5 to 10 working days to cancel any active debit orders on the client's account.
What is the role of a Payment Distribution Agency (PDA)? The National Credit Regulator has authorized Payment Distribution Agencies (PDAs) to securely collect consumer payments and distribute them to the appropriate credit providers. Debt Counsellors are not allowed to directly collect or distribute funds, so consumers are advised to make payments to an accredited PDA instead of the debt counsellors. Below is a list of NCR-registered Payment Distribution Agencies: •DC Partner (Pty) Ltd •Hyphen Technology (Pty) Ltd •Intuitive PDA (Pty) Ltd •CollectNet (Pty) Ltd For more information, visit https://www.ncr.org.za/register_of_registrants/registered_cp.php.
What is a Garnishee Order? A Garnishee Order, also known as an Emolument Attachment Order, is a court-issued instruction delivered by the sheriff to an employer, directing them to deduct a portion of an employee's salary or wages to pay off a debt owed to a particular creditor. The deducted amount is taken directly from the employee's salary before it is paid into their account.
What is POPIA? POPIA, the Protection of Personal Information Act (Act No. 4 of 2013), is a new law that all organizations must comply with. Its purpose is to protect citizens from potential harm by safeguarding their personal information and privacy, which are regarded as fundamental human rights.
What steps should I take if I disagree with the information on my credit report? If you need to dispute, update, or remove any information from your credit profile, you should reach out to the relevant credit bureau, complete the necessary application form, and submit the signed copy along with any pertinent evidence to the credit bureau. Upon reviewing your case, the credit bureau will furnish you with a reference number for further inquiries. Resolving the matter may take the credit bureau up to 20 working days.
What is the process for obtaining a copy of your Credit Bureau report? According to the National Credit Act, consumers are entitled to one free credit report per year. You can contact any registered Credit Bureau to request a copy of your credit report. However, if you request additional reports within the same year, the relevant Credit Bureau may charge an administrative fee. Here are the four main Credit Bureaus in South Africa: •XDS •Experian •TransUnion •Compuscan
Is it allowed to skip payments or while under Debt Review? Once a client has applied for Debt Review, it is essential to stick to the agreed monthly payments without any defaults or partial payments. Any failure to do so could lead to the termination of the Debt Review process by the listed credit providers.
What is a COB? A COB, or 'Certificate of Balance,' is a document issued by credit providers to a registered Debt Counsellor within 5 to 10 working days after a client applies for Debt Review. The document contains information such as the account number, account description, loan inception date, original repayment term, outstanding balance, service fees, credit life insurance (if applicable), monthly installment, and interest rate. Debt Counsellors use the COB to revise the payment plan (proposal) and begin negotiations with the credit providers for a lower monthly installment and interest rate on the accounts.
Is it allowed to pay more than the specified amount under Debt Review if my salary increases? Yes, making additional payments will help shorten the duration of the Debt Review process. Consumers can also choose which creditor(s) to allocate the extra payment to, allowing the Debt Counsellor to adjust the payment plan (proposal) accordingly. If there are sufficient funds, consumers may also pay off accounts in full, with updated balances available through their Debt Counsellor.
Once a Clearance Certificate is issued, how long will it take for the registered credit bureaus to update the information? The issuance of a Clearance Certificate marks the successful completion of the Debt Review process, confirming that the client has paid off all debt obligations included in the process. Once the Debt Counsellor issues the Clearance Certificate, all registered credit bureaus and listed credit providers are notified and provided with the relevant paid-up letters as proof. This results in the removal of the Debt Review listing from the consumer's credit profile. Credit bureaus have up to 28 working days to update the information, although the processing may take as long as 3 months.
What is the process for informing credit providers when a client applies for Debt Review? Once the completed and signed Form 16 (application form) is received, the Debt Counsellor will enter the information into their system and notify credit providers by issuing a Form 17.1. A copy of the Form 17.1 will also be sent to the consumer for review and record-keeping as proof of the Debt Review/Debt Counselling application.
Can a client apply for Debt Review if they are unemployed? No, employment is a key requirement for the Debt Review process. The Debt Counsellor will negotiate a reduced monthly repayment, which the consumer must pay in full each month without any defaults or partial payments, as failing to do so could lead to the termination of the Debt Review process.
What does a cascade summary refer to? A cascade summary is a visual representation showing how funds will be allocated to each credit provider monthly until the debts are fully paid off. This document is part of the proposal (payment plan) created after assessing the consumer's income and expenses, outlining the available funds and suggesting reduced interest rates for the accounts.
What does incidental credit mean? The National Credit Act 34 of 2005 defines an incidental credit agreement as an arrangement for providing goods or services over a set period, where a fee, charge, or interest becomes due if the amount owed is not paid by a specified date. In such agreements, the parties do not intend to create a formal credit arrangement. For example, if a medical bill remains unpaid past the due date, and the medical practice sends the account to a debt collection agency with interest charges, the debt would be considered incidental credit.
What does prescribed debt mean? Prescribed debt refers to consumer debts that have exceeded the time limit during which the borrower remains legally responsible for repayment. Debts such as credit card balances or personal loans or retail accounts can only be prescribed after 3 years. According to The Prescription Act 68 of 1969, Section 10(1), a debt is considered prescribed if: •The client has not acknowledged the debt, either in writing or verbally, in the past 3 consecutive years. •The client has not made any payments toward the outstanding amount or promised to do so. •The credit provider has not issued a summons for the debt in the last 3 consecutive years. Therefore, if no payment has been made by the consumer for 3 years, and no summons has been issued during that period, the debt will be classified as prescribed, freeing the consumer from any legal obligation to repay the outstanding debt.
What are the two methods for exiting Debt Review? 1. If a Form 17.2 Acceptance (declaration of over-indebtedness) has been issued to all listed credit providers but no Debt Review court order has been granted, the only way to exit the Debt Review process is to have the client declared not over-indebted through the court. This means the client’s income and expenses must show they can afford their contractual debt repayments (monthly installments to creditors before applying) without arrears. They can consult a Debt Review Attorney to seek this declaration. 2.Once a Debt Review Court Order is granted, the consumer cannot exit the process until all outstanding debt is fully settled, or all unsecured debt is paid off and only the bond remains (with no arrears). The Debt Counsellor on record can then request paid-up letters for all accounts to issue a Clearance Certificate to all registered credit bureaus and listed credit providers.
How are terms calculated? After a Debt Review application, all relevant credit providers will issue Certificates of Balance (COBs), detailing outstanding balances, monthly installments, service fees, interest rates, and any credit life insurance. This information is entered into our system, which automatically calculates the terms for each account when preparing the proposal, also known as the 'payment plan'.