Consumer Friend Webinar
Consumer Friend Covid-19 Webinar
Well known outsourced credit provider debt review solutions firm Consumer Friend hosted an industry webinar about Covid-19 this week. This is the first of several webinars to come over the rest of the year from Consumer Friend. The objective was to touch base with industry leaders about the current effect of Covid-19 and the lockdown on their businesses (regarding debt review) and their expectations for the future.
Overall there was agreement among the speakers that the lockdown saw new debt review applications drop off suddenly and consumers who were already in debt review asking for relief.
After a nice introduction by Justin (from Consumer Friend), the first speaker was Tim (from the NCR) who spoke about the two big NCR impacts o the industry as the Covid-19 Pandemic took root. The first was a circular which changed the normal “business days” requirements for the industry and pushed things out to an undefined point after the end of lockdown. At that time only level 5 was in effect and there was little clarity on how things would progress with regard to who could work when etc under lower lockdown levels. A later speaker pointed to these provisions as having reduced the amount of possible “terminations” (where a credit provider tries to get out of the debt review and rather take the consumer to court again in a parallel legal process) by between 11 000 and 15 000 affected consumers in the retail sector alone.
Tim then also discussed the NCR and CIF backed process for changing consumers debt review obligations (without having to go back to court) through the use of an industry-created form called a 17.3. The process was in use int he past but the NCR put their seal of approval on the process and issued a non-binding guideline to the industry advocating its use.
Next up was Herman (representing the Payment Distribution Association of South Africa). He spoke about some of the figures that all PDAs have observed during the lockdown. At level 5 around 23 000 consumers did not (were not able) to make payments. Hopefully, 17.3 arrangements were made for all these cases.
There was also a massive spike in short payments and disputes on payments that were made via debit order. Fortunately, the NCR had issued a notice that the PDAs were able to hold onto payments for a few extra days during the lockdown just in case consumers would reverse payments and this was something of a lifesaver to the PDAs who may otherwise have been hit with massive losses.
He reported that one troubling thing that came up during lockdown is that some credit providers who knew that the NCR was allowing the PDAs to hold the funds for a bit longer than normal had been contacting consumers under debt review and telling them payments were not being made and they should leave debt review.
‘The PDAs have seen roughly a 50% reduction in new sign ups’
The PDAs have seen roughly a 50% reduction in new sign ups and they have also seen the average monthly debt repayment figure drop as consumers are getting hit with income reduction despite government aid. They are concerned about what happens when the government aid to consumers wears off.
Louis (from Wesbank) spoke about how internally at Wesbank most collections processes had been stopped temporarily and they too have seen new debt review applications dry up. They have however been inundated with 17.3 applications for temporary relief. They have been offering up to 3 months payment holidays for those in debt review and will soon find out what further measures they will be able to offer as the crisis progresses.
One area they are concerned about is how when Debt Counsellors have asked for relief on behalf of a consumer they have then not come back to Wesbank with more details on how they suggest the plan is restructured. Wesbank would like to put something on the system (even if as a temporary measure and then adjust again if needed). Even where Debt Counsellors could not produce fancy proposals as normal due to technical challenges even emails with proposals would surface so long. Of those who applied for relief on behalf of clients only 30% followed up with formal proposals.
‘Of those who applied for relief on behalf of clients only 30% followed up with formal proposals’
Other attendees also mentioned they have experienced the same challenge and realise that there is still a lot of uncertainty on the consumers’ side but would like to put something in place so long and amend later rather than not add anything. Credit providers would like to be able to differentiate between Covid-19 related arrears and people who are simply not paying their debts or have been missing payments.
Louis also explained that many credit providers computer systems do not have the ability to simply “freeze” a consumers account. They need to be restructured to account for the changes. There are some legal challenges with this, as the Act allows for payment freezes (including in debt review and potentially in debt intervention) but the software is unable to do so.
Many credit providers have been willing to make payment relief arrangements from 3 up to 6 months at present during the Covid-19 outbreak and lockdown.
CJ (from ONE) gave a look into how the insurance world is reacting to the recent Pandemic and change in who is claiming and paying for what. He spoke mainly from ONE’s perspective and shared some information about how they anticipate some massive spikes coming. They anticipate many more retrenchment claims and business interruption claims. They also anticipate debt review to be used by many troubled consumers in the months ahead.
Laslo (representing the NCRF retail section) revealed how towards the end of 2019 and start of 2020 there were more consumers than in years past signing up for debt review. This was then slashed by 60% or so when the lockdown began.
‘towards the end of 2019 and start of 2020 there were more consumers than in years past signing up for debt review’
As regards people in debt review asking for some relief in the past there had been an average of around 600 people asking for a change each month (a fairly small number compared to the overall number). In April that amount went up to 8600 people and then up to 22 500 people in May. This is just a reflection of the lockdown hitting peoples income. They are now wondering how long the temporary reductions will last and how many will become permanent reductions. They anticipate having to make some hard calls in regard to terminations (NCA S86(10)) in the future for those who have become unemployed.
Laslo says that credit providers need to start to invest extra in their debt review departments (staff and training) since there is a debt bubble that is about to burst and they anticipate a huge influx into debt review in the 3rd or 4th quarter of 2020.
After words of thanks from Justin to the guests and speakers, the webinar then ended.