FAQs - Debt Counselling?

What is debt counselling?

Debt counselling is a process of assisting consumers that are experiencing debt related problems through:-

• Budget advice;
• Restructuring their payments;
• Negotiating with credit providers on their behalf, and
• Monitoring their payments while
• Providing after-care services

Debt counselling is done by a debt counsellor. This is someone who is registered with the National Credit Regulator (NCR) and who assists consumers who are experiencing debt-related problems and are having difficulty making their current monthly payments by providing them with budget advice support and mediation with credit providers.

How does it work?

Debt counsellors can work independently or as part of an organisation. In terms of the Act, debt counsellors cannot be part of organisations that provide credit, debt collection agencies or credit bureaus. A consumer who is over-indebted may approach a debt counsellor directly, or he/she may be referred to a debt counsellor by his/her creditor/s or by the magistrate court. Consumers can call the NCR on 0860 627 627 to get a list of registered debt counsellors or log on to www.ncr.org.za register of registrants.

How much does it cost?

In a bid to curb the exploitation of consumers, the NCR has agreed to guidelines proposed by the Debt Counsellors’ Association of South Africa (DCASA), together with other Debt Counsellors. The guidelines are an interim measure aimed at setting maximum fees that Debt Counsellors may charge in order to limit exploitation of over-indebted consumers, pending the finalisation of the fee regulations by the Department of Trade and Industry.

The guidelines cover consumers earning more than R2500 (individual gross income). Consumers earning below R2500 will be subsidised by the NCR.

In terms of the guidelines, a Debt Counsellor may receive the following amounts in respect of consumers with an individual gross income of more than R2 500.00 per month or household income of more than R3 500.00 per month:

1. An application fee, recoverable directly from the consumer upon receiving an application for debt review, limited to R50 as prescribed by the Act.
2. . A rejection fee of R300.00 in respect of consumers whose applications have been rejected in terms of section 86(7) (a);
3. A restructuring fee of the lesser of the first installment of the debt re-arrangement plan which is capped at R3000.00 (excluding Vat), in respect of a consumer whose applications have been accepted in terms of sections 86(7) (b) or 86(7) (c). (Should a joint application be required the fee can be increased to R4000.00 (excluding Vat)).
4. Should a Debt Counsellor fail to submit proposals to Credit Providers or refer the matter to a Tribunal or a Magistrate Court within 60 business days from date of the debt review application the Debt Counsellor has to refund 100% percent of the fee paid by the consumer.
5. A monthly after-care fee of 5 percent (excluding Vat) of the monthly instalment of the debt re-arrangement plan up to a maximum of R300.00 (excluding Vat), for a period of 24 months, thereafter reducing to 3 percent (excluding Vat) of the monthly instalment, to a maximum of R300.00 (excluding Vat), for the remaining period of the debt re-arrangement plan.
6. Should the consumer wish to withdraw from the process after the Debt Counsellor has completed the restructuring negotiations a fee equal to 75 percent of the restructuring fee as per 1.3 above is payable by the consumer;
7. Legal fees, if and when they occur, may be recovered from the consumer provided the amount of such fees are disclosed up-front to the consumer and agreed to in writing by the consumer.

Debt Counsellors are reminded that as per the conditions of registration it is a requirement for debt counselling fees to be disclosed upfront to consumers before they can be accepted for debt counselling. 

When you are suffering under the yoke of over-indebtedness, then you need a debt counsellor.
A consumer is considered to be over-indebted if the money available after payment of essential expenses is not enough to pay all other debts.  Herewith some indicators of over-indebtedness:-
A consumer is over-indebted when he/she cannot service all his/her debts in a timely manner as agreed in the credit agreements.  The following are indicators of over-indebtedness:-

• You use your credit card and overdraft facilities to pay debts and buy food and other necessities;
• You borrow money to pay other debts;
• You skip payments on some accounts in order to pay others because you cannot keep up;
• You cannot pay your bills at the end of the month;
• You receive letters and summonses from creditors and/or lawyers;
• You are considering being placed under administration;
• You have judgments granted against you.

Avoid getting more debt, rather downgrade and change your lifestyle! It is important to remember that a change in lifestyle is the first step in creating a better environment for ourselves as consumers in these challenging times. You will need to cut some things and/or make adjustments in order to stay afloat.
Things you need to cut/adjust are:

1. Alcohol
2. Tobacco / cigarettes
3. Entertainment
4. Club membership
5. Pay/Satellite TV
6. Holiday clubs
7. Gambling 
8. Where possible use public transport

You will find that by cutting these items out of your budget, you have more cash. You then have the option to either save that money or pay more on your account and therefore reducing your monthly debts.