The NCR Fee Guideline Breakdown (Part 5)

NCR Proposed Fee Guideline – NCT Applications

Certain types of debt review matters can be put before the National Consumer Tribunal (NCT). To do so a Debt Counsellor needs to pay R200 and then after a few weeks, the matter will be heard (often by a travelling motion court). The NCT can then issue an order restructuring the debt (as long as all parties are happy with the plan). This has the same force as a Court Order.

The application is similar to a Magistrates Court order but the NCT have a lot of experience with these particular types of cases and they tend to move swiftly and easier through the system. Over the past while the National Credit Regulator has encouraged debt Counsellors who are able to to take matters to the NCT.

While there was something of a cooling in the relationship after the NCR asked Parliament for some of the powers the NCT currently have, Debt Counsellors have still been directed to try reduce costs for consumers via this process if possible.

‘When starting a debt review there is no way of knowing if all credit providers will agree to the repayment plan’

When starting a debt review there is no way of knowing if all credit providers will agree to the repayment plan since not all the information is available at first. Thus most Debt Counsellors still organise for attorneys to be involved in preparing the documents (either for court or if possible for the NCT). Since the attorney’s hourly rate or discounted package rate to the Debt Counselling firm are normally consistent regardless of it going to court or the NCT this has not really meant too much of a reduction in costs to the consumer 90% of the time. Some Debt Counsellors, however, try to use the NCT and not any attorneys. This has then helped reduce costs to the consumer, in some cases.

In the past, the NCR has said that Debt Counsellors can charge R750 for their services in regard to preparing NCT documentation and matters (eg. briefing of the attorneys). These are the current fees. The NCR even called it a legal fee. Obviously, the various Law Societies do not like the use of that term (only Attorneys and Advocates can charge Legal fees). This fee is now being re-branded and the rate dropped dramatically.

The Proposed Fee Guideline

6. NCT submission fee 

This will cover the submission of the NCT application and R500 can be charged (and become payable after completion of the debt restructuring process).

Problems

What exactly is the ‘completion’ of the restructuring process? Is it when the debt is finally all paid? Hopefully not. No, it does not seem that this is the intent but the wording is somewhat ambiguous. It may just be when the NCT restructure the debt in their order.  It may be completed once ordered. As we discussed in a previous related article, a Debt Counsellor does not restructure debt a court or the NCT does. But what if the NCT are busy for months at a time (as has been the case in the past) or the matter is delayed for a long while? When then is the money set aside? Would it suddenly come out of the consumer’s payment on the very month the order is granted? This might be hard to factor into the repayment plan since the Debt Counsellor would not know in advance when that will be exactly. What if for one reason or another the NCT application is not granted and the matter has to go to court? Does that mean this fee would never be charged even though all the work was done? Admittedly it is a tiny insignificant fee but still, it is the principle of the matter and Debt Counsellors do want to try stay profitable and in business.

Since the application to the NCT costs R200 (it used to be only R100 in the past but went up 100%) and is paid by the Debt Counsellor, the amount of R500 for the Debt Counsellor is not only a reduction of R250 (down from R750), it is actually a reduction of R450. The Debt Counsellor would now be able to take an effective R300 out to cover his time and effort.

This seems to be a reflection of the cooling of the relationship between the NCR and NCT, as it seems to be a reduction in incentive to drive matters via the NCT. Rather it incentivizes going back to the Magistrate Courts.

Some might argue that the idea is to save the consumer money and thus an attorney fee cannot be levied if matters go via the NCT. Indeed, the fee guideline is quiet on the topic of attorney’s fees for legal work at the NCT. This would then mean that to draft and supply the application and appear and handle the application at the NCT motion Court the Debt Counsellor would only receive an effective R300. Obviously, that would be a huge drain on time and resources for the Debt Counsellor (if they could not make use of a 3rd party attorney to handle the matter for which the consumer pays). It would then be a much more cost effective business practice for the Debt Counsellor to simply drive matters to their local Magistrates courts even though it would cost the consumer more.

The NCT have however repeatedly said that any party making an application to them can be represented by another party and so, it seems that an attorney representing the Debt Counsellors application, on behalf of a consumer would be fine (and the legal fee which we discuss next could cover the attorney’s costs). As long as the consumer is aware, in advance, of the legal costs and they are factored in then all should be well (and beneficial to the consumer who gets expert representation).

Regardless, for the amount of extra work involved it might simply be easier and more cost and time effective to stop using the NCT. Is this the NCR’s intent? To remove the incentive to use the NCT?

‘If the plan is to take away any need for involving the NCT in consent orders then this guideline fee will do just that’

Solutions:

If Debt Counsellors were somewhat happy (if admittedly under compensated ) in the past, to do this work for R750 before the NCT fee went up by R100…why not push the fee up by a similar amount? Perhaps then adding something extra for inflation since 2009?

If the goal is to get the Debt Counsellor to drive matters via the NCT and to reduce legal fees to consumers then why not structure the matter that if the Debt Counsellor does the entire application without the help of attorneys they can take a larger portion (eg. R1500) out of the funds that could be set aside for attorneys fees – the remainder of which would be returned to the consumer or held in trust or pumped back into the consumers repayment plan?

It might also be good to clarify that these funds be set aside during the initial month/s of the review rather than be drawn at the point the order is granted by the NCT. Here we have a challenge, in that, the PDAs cannot hold fees since they have to distribute within a few days of receiving funds.

If the plan is to take away any need for involving the NCT in consent orders then this guideline fee will do just that. The courts can look forward to a lot more cases on the roll. If however, it is not the intent, then this fee needs urgent attention and some clarification.

 

 

 

 

 

 

 

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