New NCR Debt Counselling Fee Guideline Released
After many years, and a lot of pressure from struggling Debt Counsellors the National Credit Regulator (NCR) has updated their guideline on Debt Counselling Fees for the debt review process. The new Debt Counselling Fee guideline has been favourably met by most in the industry and should not cost consumers much more in the way of costs but allows for more sustainability within the industry.
There has been a somewhat meaningless increase in the cap for the upfront fees which will seldom come into effect. The previous cap of R600 now increases to R8000 or 9000. The average restructuring fee in the industry recently seems to have been averaging out around R2500 – R3000 for the majority of consumers. Thus this is the figure they would pay. There has however been a new administrative fee been added (R300) which will help cover some basic data capturing costs.
After Care Fees
The new Debt Counselling fees allows for aftercare fees to remain at 5% throughout the process, helping keep debt counselling practices sustainable. Previously the fees going to the Debt Counsellor dropped to 3% just when the workload increased making it hard for Debt Counsellors to continue to offer quality service to consumers who were finally paying off accounts and ready to leave debt review.
‘The new Debt Counselling fees allows for aftercare fees to remain at 5% throughout the process’
This is a huge win for the industry after a scary initial draft proposal on the topic which would have seen aftercare fees drop even sooner rather than raise. While 2% of the consumer’s payment may make little difference to them (these fees come out of the monthly repayment which stays at a constant amount for the consumer) it is a huge difference to firms trying to keep a high level of aftercare. The aftercare fee is capped at a slightly higher than before R450/month (even if 5% of the full monthly repayment would be more).
A lot of work is done in debt review towards the later part of the process and the new fee structure seems to acknowledge this.
In addition, the NCR have tried to help incentivise the investigation fo reckless lending by including a small fee to help cover administrative costs in the amount of R1500. While this is small in comparison to the workload involved, it is an improvement over the previous fee – which was nothing. According to the NCR’s 2009 Task Team report (also a guideline) every matter needs to be investigated for reckless credit even if the consumer does not ask (which is what the Act says must happen). The Portfolio Committee on Trade & Industry have also proposed a draft bill to change the NCA to require that Debt Counsellors investigate each account or face fines or worse. This new fee would help cover some of the basic costs.
You can download the Fee Guideline here:
The New Fee guideline applies as of April 1st (Yes April Fools Day) 2018. Most other parts of the industry (PDAs and Credit Providers) have been hit by reductions in fees. This guideline seems to buck this trend and allow for slightly better sustainability. The new Debt Counselling Fee Guideline does, as before, tend to incentivise helping high-end clients with more debt over the poor but the addition of the small R300 administrative fee will help cover the increased workload that all Debt Counsellors face daily. Keeping the After Care fee at 5% throughout may help somewhat to offset the cost of increased workload as consumers near the end of the process.
Please note that while the guideline reflects the NCR’s view on what fees could be charged it is not legally binding and each Debt Counsellor and client can decide on a fee structure and agree to it in a contract. The guideline does, however, advise consumers of what might be considered an industry norm.
Please note that the February issue of Debtfree magazine which was scheduled for release Fri 23rd has been delayed to allow for an article on fees to be included.