Are you considering debt counselling but unsure of what the process entails and what it means?
The Credit Ombud, together with the MicroFinance SA, have put together a few frequently asked questions and responses when it comes to debt counselling.
What is debt review/counselling?
Debt review is a debt relief measure to assist consumers who are over-indebted.
A debt counsellor will assess your finances and outstanding debt obligations to ascertain whether debt counselling is the right course of action. The debt counsellor notifies your creditors of the application for debt review and would negotiate reduced payments to credit providers.
This relief is offered to over-indebted consumers who struggle to meet their monthly payment obligations. Your debt counsellor will approach a magistrate’s court to confirm that you are an over-indebted consumer and therefore require your debts to be restructured.
For this reason, it is essential that you discuss the fees payable with your debt counsellor.
What should a consumer consider before getting under debt counselling?
It is really important for consumers to know that the type of consumer who would consider getting debt counselling is someone who is over-indebted and simply cannot meet monthly obligations. This may not only be limited to credit obligations.
If you are a consumer who is basically relying on credit for day-to-day expenses and live above their means, then debt counselling is for you.
Can a consumer apply for further credit while under debt review?
When you are under debt counselling/review, you cannot apply for further debt. The moment you enter debt counselling, a notice/flag will be placed on your credit profile that will state that you are under debt counselling.
This debt review flag alerts other credit/service providers that you may not be extended credit because of you being under debt review.
I didn't apply for debt counselling; however, when I applied for credit or when they checked their credit reports, they found that they were under debt counselling. How does that happen?
The Credit Ombud has indeed received many complaints from consumers who claim that they were not made aware that they were entering a debt counselling process. They inform our offices that they merely received calls enquiry about their monthly instalments being reduced. Consumers are unwittingly entered into debt counselling.
Debt counselling call centre agents inform consumers that their debts would be restructured or consolidated.
We caution consumers that if they are not certain about the information being provided to them over the phone, that they should rather take down the details of the company calling them and confirm with the NCR whether it is indeed a debt counselling firm duly registered before they agree to anything telephonically.
Can a consumer then withdraw in such instances?
Consumers who find themselves in a situation where they were not in agreement to go under debt counselling, may contact the NCR for further assistance.
When can a consumer exit the debt review process?
After all debts have been paid up in full and arrears on a bond/mortgage are up to date in terms of the debt counselling restructure, the debt counsellor will assist with the application for a clearance certificate. Once the clearance certificate has been provided to the consumer, the debt counsellor will then update the consumer’s credit profile and remove the debt counselling flag. You cannot voluntarily withdraw from the debt review process.
Should a consumer have a debt review complaint, where can they go to get assistance?
For complaints against a debt counsellor or any other debt review matter, consumers may contact the NCR to lodge a complaint and the NCR will investigate the matter.
When does the Credit Ombud intervene?
Once a consumer has paid up all their debts and a clearance certificate has been issued to them by their debt counsellor, the consumer may approach our office for assistance should their credit profiles not be updated.
The consumer would have to lodge their dispute with the credit bureau and follow the regulated process of allowing the credit bureau 20 working days to investigate. Should the complaint not be resolved within the 20-working-day period and the consumer can also prove that they have lodged their dispute with the NCR to get the debt help system updated, then they may approach the Credit Ombud for further assistance.
Questions may be edited for brevity and clarity.
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