One of the major problems with debt is that there are many people who advertise and offer consumers a way to get out of debt, but these remedies often mean that the consumer pays for these services and ends up with more debt than before.

Many consumers pay an administrator an amount each month so that they can distribute the money to different creditors and this can add to the debt.

Administrators charge for their services, usually more than R1 000 to get the court order. They also take at least 12.5% of each instalment that is paid for their fees.

Usually the instalment that the consumer pays is much less than the total instalments they were required to pay on the debts combined, so each creditor receives much less than the original agreed instalment. However the consumer continues to pay interest on each account, and the administrator only distributes money once every three months, so often the balance on the debts may even go up instead of down because the creditor is receiving less than the interest that is being charged.

Some administrators also do not pay over on time, others do not pay over the money received at all.

Administrators are supposed to prepare distribution accounts every quarter, but most often consumers do not receive copies, so they do not know what the charges are, or how much each creditor is receiving. One case study showed that a consumer had to pay R49 050 on a debt that would have been R15 807 if the consumer had not paid the debt through the administrator.

If a consumer is in a situation where they have relied on one of these for-profit debt intermediators, as a paralegal you should ask for all the distribution accounts, contact the creditors to see if the consumer can make arrangements to pay them directly, and then go to court to have the administration order rescinded. If necessary contact a consumer advice office or not-for-profit debt counsellor for help.