Debt Review Discussed At Parliament
Industry News
Recently, the National Credit Regulator (NCR) and the Department of Trade and Industry (DTIC) presented an important update on the state of debt review in South Africa to Parliament.
They shared valuable insights and discussed the challenges faced in implementing the existing debt review system. They also had several ideas and suggestions on how they would like to address these issues.
Let’s take a look at some key points that were highlighted during the presentation.
The Facts & Figures
There are currently 1,554 registered Debt Counsellors as of March 2023.
These dedicated professionals play a vital role in assisting individuals overwhelmed by debt and implementing debt review.
The number of applications for debt review has supposedly been steadily increasing recently, with an average of around 11,000 each month.
The total number of applications since the inception of debt review has reached an impressive 1,868,292. At present, it is estimated 200 000 or 250 000 people are actively in the process.
Challenges & Proposals
During the presentation, several challenges were brought to light, along with proposed solutions.
For example, the need for stricter registration requirements for Debt Counsellor, though there was little said about additional training or mentoring.
Then the presentation moved onto some of the NCR’s current concerns such as possibly misleading advertisements and marketing practices within the debt counselling industry. Some advertisements use phrases that the NCR feel may mislead consumers, such as “payment holiday” or “up to 50% reductions on instalments.”
To combat such practices, new regulations were recommended to address possibly misleading advertisements and even to possibly prohibit the selling of leads for debt counselling purposes.
Consumer understanding of the debt counselling process and its implications emerged as another important issue. It was proposed that the application form be amended to clearly outline the obligations of the consumer and provide better transparency about the consequences of debt review.
Another area of concern was the lack of a straightforward exit process for consumers who change their minds or experience improved financial circumstances.
It was suggested that a cooling-off period be introduced in the National Credit Act (NCA) to allow consumers to make informed decisions before committing to debt review. Additionally, changes to the wording in the Act were proposed to facilitate the early exit of consumers whose financial situations improve during the process.
Fees & Costs
Then it was onto some of the more sensitive topics relating to the cost of the process.
The referral of consented restructuring proposals to the Magistrate Court instead of the National Consumer Tribunal (NCT) was also highlighted as an issue. It was suggested that all consented restructuring proposals be referred to the NCT, as this would save financially distressed consumers from unnecessary legal costs and position debt counselling as a more viable debt relief measure.
The fees charged by Payment Distribution Agents (PDAs) and Debt Counsellors were addressed as well. The current PDA fees have not been reviewed or updated in years, and there were challenges with consumers attempting to reverse debit order payments made during debt review.
It was proposed that the fees be reviewed regularly, with the NCR (not DTI) having the authority to set and update them. The stated aim is to ensure sustainable practices for both PDAs and Debt Counsellors.
A Well Received Step Towards Future Amendments?
The proposed solutions presented during the session were well received, indicating a positive step towards possibly improving the debt review process.
The DTIC has expressed interest in addressing these issues by potentially promoting and implementing necessary changes to the National Credit Act.
By doing so, they hope to strengthen consumer protection, assist consumers who wish to leave debt review early, and keep costs reasonable.
The presentation serves as a promising starting point for possible amendments to the Act and enhancing the debt review process.
For a more detailed report on all the different items discussed and the proposed solutions the DTI and NCR have in mind check out this month’s coming issue of Debtfree magazine.
