The National Credit Act encourages consumers who are “over-indebted” to approach a debt counselor or dispute resolution agent for help in developing a repayment plan for all debts to be repaid within a reasonable period of time.

Consumers can also approach a creditor for help in developing such an arrangement on an informal basis, or the court may refer the consumer to a debt counselor if the consumer appears in relation to a single debt.

When you are deciding who to refer the consumer to, it is important that the person whom the consumer approaches, has a good reputation, tells the consumer upfront what they charge, and that the charges are reasonable. You may find some NGOs who do not charge or charge very little and are committed to helping consumers. There are also creditors who are looking to help their clients in a similar way and will not charge for their services.

With debt counselors the process is formal and is set out in the National Credit Act.

The consumer will complete forms which will include details and proof of all their debts, as well as their income and other expenses. They will look at whether any of the debts were granted “recklessly”, for example, if at the time that the consumer applied for credit, whether the creditor properly assessed that the consumer could afford to repay the loan (the court can order a remedy if the loan was granted recklessly but the consumer would have to have given full disclosure of all their debts and expenses or else no remedy is available). The counselor will work out a plan as to how the debts will be settled and what the monthly repayment will be. If the repayment plan is accepted, it is made an order of court. If the creditors do not accept the proposed plan, they can oppose the plan and the court will then decide whether to grant the order or not. Once the order is granted, the consumer’s monthly payments are paid either directly by the consumer to the creditors or most often, to a payment distribution agency who also charges for their services, and who distributes the portions to the creditors. The arrangement will be listed on the credit bureaus and the consumer will not be allowed to take further credit until they have paid off their debts.

If you need a debt counsellor or if you have a debt counselor that you are not happy with and need to complain about, contact:

The National Debt Mediator’s Association Tel 086 111 6362, email info@ndma.org.za

The National Credit Regulator Tel 0860 627 627