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What's Going On?

Lately, some people who work for big South African banks have been vocalising their dislike of debt review.

Certain people at Capitec Bank and Nedbank, in particular, have been pushing rather negative stories about it in the media. This has resulted in recent articles on MoneyWeb, and Business Day with negative headlines like:

When someone reads these articles, or even just the headline, they tend to have a bad impression of Debt Review and Debt Counsellors.  

Many of the articles mentioned above have a negative message about using debt review to pay off debts.

Why do we sometimes see comments like this from Senior Executives of the big banks, while the very same banks have entire debt review departments that are helping bring in R1.5 Billion each month through debt review?

These debt review departments love debt review, but some executives from other departments run around bad mouthing debt review, it may not make sense to you.

Let’s look behind the scenes and see what might really be going on.

The Low Down On The Real Real

Capitec Bank CEO, Gerrie Fourie, has been leading the charge of negative comments recently.

While having to deliver less than fantastic stats about how the bank is performing, he has also been claiming that debt review is

(1) shrinking the credit market and

(2) hurting clients’ chances of getting credit in the future.

Why might he be saying that?

Well, many Capitec clients actually do need debt review.

In the last two years, they’ve set aside an extra +- R1 billion in provisioning, because some of their customers are struggling to pay what they already owe, and are entering debt review. Their total debt review provisioning now stands at R6.3 billion, that’s a fairly large amount of money.

‘Their total debt review provisioning now stands at R6.3 billion’

Capitec also notice that many people who start debt review, often do not finish the process, and because the credit bureaus keep a record of the debt review even though the consumer stops working with a Debt Counsellor and stops paying via one of the 4 NCR registered Payment Distribution Agents (PDAs), credit providers are scared to lend them more money.

They are worried they are later told they have been “reckless” in their lending, resulting in the consumer not being forced to repay that credit. So, often they tell the consumer they can’t help them. This does upsets the consumers who are forced to carry on paying off their debts (but without the benefit of a Debt Counsellor’s help and all the amazing benefits the banks offer via debt review). These drop-out consumers are stuck living with the consequences of their bad choices, and it really stings.

But is Mr Fourie correct in saying that debt review hurts consumers’ future prospects of getting more credit?

While these consumers are listed at the bureaus, and are forced to pay off their debts, they can’t go around making more debt. But what about later down the line?

Interestingly, the National Credit Act actually requires that once a person’s debt review is completed and all their debts are paid off, the record must be removed from credit reports, so, no future problem.

The only possible way then that this might hurt the consumer, is if Capitec internally keep records and then illegally discriminate against the consumer for having entered debt review in the past.

‘The National Credit Act also makes it illegal to discriminate against a consumer who uses a provision of the Act to deal with debt or credit’

The National Credit Act also makes it illegal to discriminate against a consumer who uses a provision of the Act to deal with debt or credit. So, the only way this might be true is if the bank decides to break this law – which they obviously would never do.

So, the comments made are strange and seemingly have little foundation in reality.

Shooting Themselves In The Foot

Also, while loudly complaining that people are now repaying their debts to the bank in a responsible and regular way through debt review, Capitec admits that they’ve cut a lot of people off from credit, by being very cautious in lending.

Could this be real reason why they have seen a decrease in potential clients (not because of debt counselling)?

After several years of that policy, Capitec Bank have now been quite public in saying they plan to loosen these restrictions, and start to offer more credit to people with a higher risk profile in an effort to scoop up more clients before their competitors do.

It seems a bit contradictory and biased to criticize debt review as being a bad thing, while planning to lend more to riskier clients to drum up more business.

Another vocal executive has been Nozizwe Tshabuse from Nedbank Client Debt Management & Recoveries (Retail and Business Banking not the Debt Review Department) who also had some rather negative things to say about debt review.

She has been quoted saying that debt review can (1) hurt credit scores and (2) affect young people who want to buy homes in the future. Once again, isn’t this a bit misleading?

Yes, debt review is noted by credit bureaus while it is happening, but so is any debt or missed payment. Missed payments on debts will definitely show up on people’s credit reports. And we know that over 40% of credit users are months behind on payments or miss payments regularly. This negatively impacts on their credit scores much more so than by paying off their debts regularly each month via debt review. Admittedly the credit bureaus systems are weak and they do not report on debt review incredibly well. It could truthfully be much better.

And once again the same facts apply: once all debt is paid off through debt review, the record is cleared.

So, why the weird comments?

Could it be because they want customers to use their new 8-month old internal department which was specifically set up to try reduce their own clients’ debts?

Did You Know?

Nedbank have a page on their website called:

How to get out of Debt Review

Standard Bank have a page about debt review with a form that offers their debt review?

(DCASA have approached them to change this wording as it implies SBSA offer debt review)

Capitec Bank has a webpage that still says:

Our experience shows that 75% of people under debt review experience no long-term benefits afterwards despite paying all the debt review fees.

Under debt review: You won’t be able to get any new credit for up to 10 years afterwards

Note: These webpages are not run by the bank’s debt review departments.

What We Know Does Not Work For Consumers & Banks

The problem for the economy and consumers is that bank-run debt recovery departments naturally focus on individual debts owed just to the bank in question, not all of a consumer’s debts.

While it makes sense that banks want to get as much of their debt repaid as possible without consumers entering debt review and having to share, what about all the other credit providers? Surely, they would also like to be repaid.

Debt review is a fair way to share the consumers’ available funds with all who are owed, without bias.

Debt review also helps consumers realistically manage and repay their debts every single month without too much strain. In the past (and even today) collections agents often demanded unrealistic repayment amounts or wanted the consumer to ignore all other credit providers and focus on their debt.

It has proved to be a short term and short sighted strategy.


    • Debt review doesn’t stay on credit records once the debts are settled, so does not prevent further access to credit
    • Banks who discriminate because of debt review in the past would be breaking the law
    • Debt review creates a fair spilt of the consumer’s available funds for all credit providers
    • Debt review budgets make sure consumers can realistically repay what is promised every single month

A Worrying Trend

Some executives, like Gerrie Fourie, say that people are joining the process due to the amazing benefits that you get while paying off your debts through debt review.

Mr Fourie worries that the adverts people see focus only on the benefits and not the fact that people have to pay off their debts.

Well, marketing is something that the industry is talking about internally but, we need to remember that only a consumer who cannot afford the essentials for their family and at the same time cannot pay all the debts they have each month can legally qualify for debt review.

This is verified when a Magistrate has a look at the math and confirms that this is the case.

So, if that is true and the Magistrate agrees, then we need to ask: should consumers who are stuck in this tough situation be barred from using the law to force the banks to play fair because of the wording of an advert?

Their legal status is still factual.

If they are actually over-indebted, then should they stay in the financial mess they are in just to keep the banks from having to set money aside to provision for their debt?

Just as a reminder, Capitec Bank makes around R60 million in profit every single day, they have not run out of money.

Also, all consumers who enter the process have to fill in forms and provide information and agree to the terms and conditions of the process (like paying off debt instead of making more).

Debt Review Is a Solution Not a Problem

While we can feel sorry for the massive banks (who are making around R15 Billion in pure profit each month) when they say they are worried about finding more clients, we do have to balance that with the purpose of debt review.

The core idea is to get those banks their money back, and each month around R1.5 Billion is being repaid to credit providers through debt review, so it is working very well.

On the other hand, the consumers involved are experiencing massive stress relief and are happy to be able to realistically pay what is now asked.

It is win/win.

It Makes Debt Counsellors Sad

When Debt Counsellors see negative stories in the press from some bank executives, they wish the media had rather spoken to the banks’ own debt review departments, who know and understand the debt review process.

‘These very hard working members of the bank’s teams are helping recover billions of rand’

These very hard working members of the bank’s teams are helping recover billions of rand each year in a reasonable and manageable way, from consumers who want to pay off their debt.

These special departments are experts at helping consumers and Debt Counsellors get arrangements in place. Wouldn’t it be nice of the press spoke to them rather than those who may have alternative agendas?