Voluntary Debt Mediation

VDMS

 Voluntary Debt Mediation

Items from most recent to oldest:

 

September 2012

The NDMA might be contemplating defying the NCR or appealing the decision.

The NCR have however already  stated that they are not interested in the NDMA trying to adjust the VDMS process so that it works. A NCR representative stated  “This is not an invitation to the [NDMA] to redesign the process – we are putting an end to it and will…make sure it has stopped,”. Rumor has it that the NCR have even prepared court documents just in case the NDMA try to go forward with the process.

Paul Slot of Octogen (one of the 3 chosen debt counselling firms which the NDMA wanted to use for VDMS)  and a member of the DCASA NEC has come out publicly  in support of the process even though the NCR have now shut it down.

DCASA have also made some more pro-VDMS statements in their recent newsletter which came out after VDMS was shut down by the NCR. (see below)

 

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August 2012

 

DCASA (the Debt Counsellors Association of South Africa) have recently sent out their monthly newsletter which still seems to support VDMS.

The newsletter which was to contain info regarding the DCASA conference which was held in August and was a smash hit.Over 100 extra attendees showed up and the conference went off without a hitch.

Other than some rearrangements to the line up (which disappointed some) and the NDMA’s CEOs inability to address questions regarding VDMS everyone seems to have benefited greatly from the conference.

You can visit the DCASA Facebook page to see pictures of the conference.

 

Back to the newsletter:

The newsletter however sadly did not focus on the conference as expected  but rather looked at a review of recent debt counselling history and reckless credit. Of interest too was a section in the newsletter which spoke about the now defunct National Debt Mediation Associations VDMS (voluntary debt mediation) pilot project. This project has almost been labelled as anti debt counselling and compared to fake debt counselling by the NCR in its recent circular. The NCR has called a halt to the project and instructed the NDMA to stop any work on such projects.

You can read more about the NCR ‘s views in these previous articles: http://debtfreedigi.co.za/ncr-circular-vdms/ and http://debtfreedigi.co.za/vdms/

This has been a strong showing for the National Credit Regulator.

The National Credit Regulator

 

It seems however that whoever compiled the newsletter missed all the hype about the fact that the NCR had now put a stop to VDMS. In fact, the newsletter went on to wax lyrical about the fact that DCASA support the project. Oops. What was true is that the DCASA National Executive Committee (NEC) stated that they were in favor of the project at one stage.

Is DCASA taking an anti NCR stance in regard to letting this matter go?

This punting of VDMS after the fact is in all likelihood just a bit of a slip up and perhaps the letter was put together before the NCR spoke out so clearly on the subject. Obviously DCASA supports the decisions of the NCR in most things and will now adjust it’s comments accordingly.

DCASA logo

 

 

 

 

If you would like to receive a copy of the newsletter (publishing rights reserved by DCASA) to read the contents for yourself then please speak to DCASA directly at dcasa@dcasa.co.za

Visit DCASA at www.dcasa.co.za

 

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The National Credit Regulator (NCR) have issued this statement regarding VDMS:

The National Credit Regulator

 

 

 

 

 

CIRCULAR No.06 of 2012

ASSESSMENT FINDINGS ON VOLUNTARY DEBT MEDIATION SOLUTION

In June 2012,the National Credit Regulator(NCR) issued circular 04 of 2012 to inform debt counsellors that it was in the process of conducting an assessment of the legality of the Voluntary Debt Mediation Solution (VDMS). This circular is intended to advise debt counsellors of the findings of the assessment done on the VDMS.
Our assessment has revealed that the implementation of the VDMS pilot would contravene the National Credit Act 34 of 2005(“the Act”) and undermine statutory debt counselling. The VDMS pilot is in essence a masked form of debt counselling with attributes similar in nature to statutory debt counselling. It also weakens the protection afforded by the Act to consumers and undermines the spirit and purpose of the Act in respect of debt counselling.
The NCR has instructed the National Debt Mediation Association (NDMA) not to implement the VDMS pilot and also issued instructional letters to participating debt counsellors and Payment Distribution Agencies(PDAs) to withdraw participation with immediate effect.

To Download the Circular click on this link:

Circular 6 of 2012-Findings on VDMS

 

To see an image of the Circular from the NCR click below:

Picture of Cicular from NCR

 

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The VDMS project has been sunk by the NCR

The National Credit Regulator ( NCR ) have issued the National Debt Mediation Association (NDMA) and the three debt counselling firms lined up for the VDMS or Voluntary Debt Mediation with letters instructing them to stop the project. This instruction is in response to a proposed plan by the credit provider representative association the NDMA to create a non regulated debt review-like process called voluntary debt mediation. The program was to use debt counsellors and software designed for the NDMA called DCRS to make proposals to settle consumers over indebtedness. The DCRS system is one of several that Debt Counsellors can use to make proposals to creditors. The system was primarily designed by the creditors themselves. The process, also like debt review was to make use of Payment Distribution Agencies (PDAs) to distribute consumers monthly payments.

Several Debt Counsellors were concerned that the process was basically debt review without the limits of the National Credit Act. Foremost among these was Deborah Solomon of theDCI (the Debt Counselling Industry) a web portal for Consumers, creditors and Debt Counsellors. She says: “The Act is very clear that a debt counsellor cannot work for a credit provider and a credit provider cannot perform the role of a debt counsellor. A debt counsellor has a fiduciary responsibility to protect the interests of the consumer,”.

The issue divided the industry (Debt Counsellors) in regard to whether to support or oppose the VDMS project. The 3 debt counselling companies that were to pilot the project for the NDMA were obviously in support of the project. Some other Debt Counsellors such as the National Executive Committee of the Debt Counsellors Association of South Africa ( DCASA ) came out in support of the project. Something that is now (in view of the outcome) somewhat embarrassing.

DCASA logo

 

There was talk of some dissension within DCASA in regard to the matter at first but this later seemingly disappeared. However there have been some big changes at DCASA in the last few days with the CEO now leaving and other members cancelling their membership. It is unclear if this issue is involved as the timing might suggest but what is clear is that not all rank and file members of DCASA supported the project. This has been clearly stated online at forums such as that hosted by theDCI.

 

 

Debt Counsellor, Deborah Solomons (and theDCI founder) essentially forced the NCR to investigate the project properly and the NCR have now come back saying that they do not approve of the project for several reasons. Not least of all is the way the project seems to be debt review by another name. The process is so similar to debt review (without the legal benefits of going to court) that Lesiba Mashapa (company secretary at the NCR) has said that the NCR’s investigation revealed that the VDMS pilot is “basically debt counselling”. This is a very strong statement. Mashapa  continues saying: “Although debt counsellors are regarded as debt mediators in VDMS, the function they are performing is debt counselling…And the use of debt counsellors in the VDMS pilot contravenes the Act and the conditions of debt counsellors’ registration, which prohibits them from working for credit providers.” The NCR would therefore have to de-register any Debt Counsellors who partook in such a project.

One of the major issues surrounding VDMS is: who pays the Debt Counsellor? At the moment under debt review the consumer pays the Debt Counsellor but under VDMS this would have shifted to the creditor. “The Act, together with the conditions of registration of a debt counsellor, doesn’t allow for debt counsellors to receive a fee or commission from a credit provider. This is to safeguard their independence,” Mashapa has said. “The Act, together with the conditions of registration of a debt counsellor, doesn’t allow for debt counsellors to receive a fee or commission from a credit provider. This is to safeguard their independence,”.

Paul Slot, president of DCASA and a big supporter of the VDMS project in the past has told one reporter that it would be “bad news” for consumers if VDMS wasn’t given a chance. Mr Slot is a very dominant presence in the Debt Counselling world and his support for the project has carried a lot of weight. It seems then that some members of DCASA may still be supporting the project even though the NCR has decided to stop it for contravening the Act.

The Alliance of Professional Debt Counsellors ( AllProDC) another association for Debt Counsellors has been quiet on the subject but did commit itself to a “anti – VDMS” stance early saying that it would not stop it’s members from taking part in the project but did not back it. This somewhat vague stance has met with criticism from Deborah Solomons who feels that the project could have had dire consequences for the debt counselling industry and ultimately given consumers something equating to half protection as opposed to the benefits of debt review through the courts.

BASA logo

 

 

Cas Coovadia, managing director of the Banking Association of South Africa (BASA) says that BASA are disappointed and are surprised that the NCR has called a halt to the project at this late date. In the past BASA members have lead the charge to challenge debt review and Section 86 of the NCA at court. This eventually lead to the NCR seeking and achieving a declaratory order in regard to debt review. This confrontational approach by BASA members and resultant declaratory order has resulted in debt review matters all going through court at the moment. This unfortunately has pushed the cost of debt review up somewhat. Recently BASA members have lead the charge in regard to trying to stop helping consumers through debt review by issuing what are called 86(10) letters. It is thus amusing when BASA and the NDMA comment on how debt review is a difficult and legal process whereas the proposed VDMS project was going to be a easy and friendly process by comparison. SAdly it seems that BASA members are the cause of these factors instead of ebjoying the benefits of debt review.

What is now clear is that the NCR are not in support of VDMS and that they have clearly instructed the NDMA not to implement the pilot and to all VDMS-related work by Tuesday 28 August 2012.

Debt Counselling is a fairly inexpensive way for consumers to deal with debt and for creditors to ensure receipt of regular (if somewhat reduced) payments. The process has been tried and tested and refined for over 5 years and has helped hundreds of thousands of consumers through tough times. The publicity around VDMS has undermined that image and maybe the words of Lesiba Mashapa of the NCR say it best: “It is important that the credit provider industry supports debt counselling and should not be seeking to establish a parallel process that undermines it,” .

 

To visit theDCI go to: http://www.thedci.co.za/consumers_overview.php

 

To Visit the NDMA go to: http://www.ndma.org.za/

 

To visit the NCR go to: http://www.ncr.org.za/

 

To visit DCASA go to: http://www.dcasa.co.za/

 

To visit the AllProDC go to: http://allprodc.org/

 

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VDMS section/Topic removed from DCASA conference (22nd Aug 2012).

The NDMA were meant to talk about voluntary debt mediation (VDMS) at the Debt Counsellors Association of South Africa conference at Kempton Park however at the last minute it was moved to an earlier slot in the line up.

No questions could be made in regard to the topic.

DCASA’s NEC have come out as proud supporters of the VDMS project.

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The NCR then replied to the DC and her attorney who reported:

The Regulator has confirmed that they are dealing with this matter and further information will be provided shortly.”

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Debt Counsellor Deborah Solomons and attorneys send another demand to the NCRand DTI  that the investigation into the VDMS matter be reported on :

“A final demand has been sent out to the National Credit Regulator and the Minister of the Department of Trade and Industry.”

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The latest news is that the NCR continue to investigate. Supposedly KNY consulting have been appointed to do the investigation.

Rumor has it that the investigation is actually complete but the report has not been published / made public yet.

Another rumor has it that the NDMA have been instructed to go ahead with VDMS until the NCR take legal steps to stop them.

Please take that with a pinch of salt though since have not been able to confirm it.

 

TheDCI published a press release waring about VDMS this month:

TheDCI warns of Debt Mediation

The portal of the debt counselling industry today sent out a consumer alert on the possible impact of voluntary debt mediation currently being punted in the press as a free service by the National Debt Mediation Association (NDMA).

 

 

 

 

South Africans who opt for the debt mediation process may compromise their statutory and common law rights, warns Deborah Solomon, a registered debt counsellor and founder of The Debt Counselling Industry portal, www.thedci.co.za.

 

 

 

 

The NDMA has been set up and funded by credit providers (banks, micro-lenders and credit retailers) and therefore the impartiality of its system and rules are open to question, says Solomon. She adds: “Statutory processes set up by the National Credit Regulator and the National Credit Act have several debtor-friendly provisions. The fact that the NCR regulates this process affords all consumers fairness and justice. The NDMA are trying to bring in a debt mediation process that is not regulated by the NCR in which the rules and systems are potentially detrimental to consumers in financial stress.

“Creditors may well encourage debtors to opt for this free service. But consumers should realise this is not obligatory. It is voluntary and they should not feel they are under any pressure to agree to this supposed remedy. “Other remedies are available – remedies set down in statute. By opting for the NDMA debt mediation rather than debt counselling or other remedies outlined in the National Credit Act, the debtor may forego some processes that can be highly beneficial.”

in duplum

A key safeguard open to those who use statutory processes is the in duplum rule which states that a creditor may not claim unpaid interest in excess of the outstanding capital owed to the creditor. Solomon adds: “In effect, a debtor using statutory processes can put a cap on the interest portion of a debt – interest that may have been piling up for years. All consumer debts that can be brought into the debt review process are dealt with equally. “Credit providers are not eager to see this cap applied. The in duplum provision is a major source of relief for indebted families that despair of ever getting out the debt trap and is only available under statutory debt counselling.

“Another concern is the willingness – or perhaps otherwise – of NDMA-appointed debt counsellors to blow the whistle on reckless lending. After all, the services of these NDMA appointees are free to the consumer; so who is paying them?”

Solomon advises consumers not to make an instant decision when a credit provider suggests or encourages the use of their own mediators. Take time to think the decision through and in the interim gather information on the pros and cons of this approach.

She adds: “It is vital that consumers make informed decisions on a step as crucial as this. One source of information is of The Debt Counselling Industry portal, theDCI.co.za. “Debtor beware! Think twice. The NDMA debt mediation process has been set up by credit providers. Do you think it is designed to work in your favour or might the outcome tend to favour the credit industry?”

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July 2012

The much discussed Voluntary Debt Mediation (VDMS) pilot NDMA project was scheduled for 2nd July 2012. It has however been called to a halt by the National Credit Regulator (NCR) at the very last minute.
The NCR are concerned that the project which potentially involved consumers having their debts rearranged by Debt Counsellors using software from the banks does not conform to the requirements and restrictions of the National Credit Act.

 

 

 

 

The NCR communication in this regard:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Download the letter here: NCR halt VDMS June 2012

It is unclear what the future for the VDMS project will now be and only time will tell.

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JUNE 2012

Press release re Voluntary Debt Mediation VDMS June 2012

Participating Debt Counselling firms

It has now officially been confirmed that the following 3 companies will partake in the pilot project:

Octogen

Consumer Assist

Debt Busters

 

Where a proposal does not solve in terms of the DCRS, the debt mediator will still be able to submit a non DCRS proposal, which credit providers will consider and accept if it makes economic sense. A consumer can also opt to go into the statutory process if they do not solve under VDMS.

 

In a recent statement by the NDMA about VDMS they have said (about sharing details of the project): “The fact that the NDMA is making this pilot project public is an indication that this is work done in good faith and open to scrutiny and criticism.

 

As to the duration of the project they have said: The pilot is for 12 months commencing from 2 July 2012.

 

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Letter sent to NDMA, NCR, DTI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Download the rest of the letter 2012.06.27 – LETTER TO NCR, DTI AND NCC – NDMA optimised

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The Debt Counselling Industry (www.thedci.co.za) pushes for more information to be made available and concerns addressed.

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Some DC’s have pointed out that if you take away the word “mediation” and put in “review” you get: Voluntary Debt Mediation Review.

They feel there is a conflict here and that Credit Providers can’t offer debt review and DC’s can’t get involved and act as agents for the bank.

They say that Creditors should rather get involved in a programme of Voluntary Debt Review.

 

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Excerpt from article on AOL about VDMS: http://www.iol.co.za/business/personal-finance/new-debt-mediation-path-piloted-1.1315226#.T9WDocXWl5G

Magauta Mphahlele, the chief executive officer of the National Debt Mediation Association (NDMA), explains how the pilot project for the credit industry-led voluntary debt mediation service (VDMS) will work:

* Participating credit providers will identify consumers who have been notified that they are in default of a credit agreement – in other words, consumers who are in serious arrears, are in the process of being handed over for legal action or who have been issued with a section 129 notice…

* If you fit into one of the above categories, you may be invited to participate in the VDMS pilot.

* If you agree, your credit provider will refer you to a registered debt counsellor who has been selected by the NDMA to take part in the pilot.

* The debt counsellor will assess your eligibility for VDMS.

* If you are eligible, the debt counsellor will apply the debt counselling rules system (DCRS), a central standardised system that calculates a proposal to restructure your debt. Normally, the only way you can access DCRS is if you are in statutory debt counselling. DCRS carries automatic consent from NDMA-affiliated credit providers. But, even though it carries automatic consent, in the statutory process the debt counsellor still has to file the proposal with either a court or the National Consumer Tribunal as a consent order. Since the DCRS reduces fees and interest rates, some magistrates have refused to accept such proposals because, according to their interpretation of the National Credit Act, the only remedies they may extend to consumers are a term extension, reduced payments and a payment holiday. [ed- in these cases the matter should simply be taken to the NCT for an order instead of fighting with these magistrates]

* Participating credit providers commit to accept and implement the proposal without the debt counsellor having to confirm it in court.

* Consumers who take part in the pilot will not pay for the service. The credit industry will fund it.

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VDMS consumers to be flagged at the credit bureaus:

Head of the NDMA Ms Mphahlele says consumers who opt for VDMS will ” still be flagged,[ on the credit bureaus] but the conditions for removing the flag may be different [from debt review]. “In VDMS, if the consumer’s circumstances change and they are able to show a sustained repayment record … the industry is considering removing the flag.

 

The NDMA are set to make a presentation about VDMS (Voluntary Debt Mediation) at the upcoming Debt Counsellors Association of South Africa (DCASA) in August this year.

For R200 members of the public can attend. Contact DCASA for more details.

 

MAY 2012

Read the May 2012 issue of Debtfree DIGI to find out more about Voluntary Debt Mediation.

[hint] Look in the news section

 

The Voluntary Debt Mediation project pilot is currently being conducted by the National Debt Mediation Association.

The industry term VDMS is being used to describe the process or project.

It is hoped that through a series of voluntary debt mediation steps consumers will be able to come to an agreement with the various creditors.

Debtfree DIGI will follow the progress of this pilot project and report monthly on developments in regard to Voluntary Debt Mediation.

 

Press release re Voluntary Debt Mediation VDMS May 2012

NDMA info regarding Voluntary Debt Mediation VDMS May 2012

3 comments on “Voluntary Debt Mediation

  1. Hi
    i hope you can assist me. I was on debt review up until Dec 2011 my business was not doing well hence i could not pay. I cannot get any info from the banks as to how much i owe them. can you tell me what can be done?

    • Well the truth is that you now face an up hill battle due to falling out of the process before.

      When going to your creditors ask for a statement… If they refuse then record them with your cell phone video camera and ask why they refuse?
      If they still refuse ask for the reason in writing on a letterhead.
      That should get you some attention (hopefully from the manager)

      If you are told they cant help you because you are still under debt review then take them the letter 17.4 letter your Debt Counsellor probably gave you.
      This letter will show you are not under debt review any longer due to non payment.

      You have a right to information about your accounts.
      Armed with any refusals you can then go to our NDMA complaints page and download the form and complain about the creditors who refuse to help you.
      http://debtfreedigi.co.za/ndma-complaint-help/

      Hope that helps

  2. Pingback: No News on Debt Mediation. VDMS latest - Debtfree DIGI magazine Debtfree DIGI

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