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What is a PDA in Debt Review?

If you are researching debt review and debt counselling, you might end up talking to a Debt Counsellor and they talk about a PDA.

In debt review, PDA is an abbreviation that stands for a Payment Distribution Agent.

PDAs are the group of companies who are officially registered with the National Credit Regulator (NCR) to handle the money side of debt review on behalf of consumers.

As you can see from the name, these companies handle payments and distribute money. But what exactly do they do and how does it make things easier for people in debt review?

PDAs Are Part of The National Credit Act

Just as Debt Counsellors, credit providers, the NCR and credit bureaus are part of the National Credit Act, so too are Payment Distribution Agents.

They play a vital role in helping consumer simplify the debt review process. They receive a single payment from consumers and do all the work in the background, following the debt restructuring plan each month. They split up the consumer’s payment into the Rands and Cents meant for each payment and make sure it goes to the right account, at the right time.

More than that, they also track and record each payment and report on these payments to Debt Counsellors and consumers. This helps make debt review a safe and easier process for consumers in debt review.

At present, the NCR officially recognises the following PDAs

  • DC Partner PDA
  • Hyphen PDA
  • iPDA

Discuss which PDA your Debt Counsellor recommends you use (and why) when you begin the debt review process.

What Do PDAs Do & What Does It Cost?

PDAs, help with the payment side of debt review.

After a formal ‘debt review’ by a Debt Counsellor, the Debt Counsellor will come up with a proposal on how the consumer can pay off their debts over time. This proposal is sent to all the credit providers, who hopefully accept (or it goes to court for them to fight about a little).

Right from the start the consumer starts to pay in line with the new proposal.

Proposals can be complex, with particular amounts paid to credit providers in particular months. Credit providers also tend to adjust some things when a consumer enters debt review. Changes can include new account numbers, payment references or adjusted fees.

‘Credit providers also tend to adjust some things when a consumer enters debt review. Changes can include new account numbers, payment references or adjusted fees’

Consumers who enter debt review normally do not want to have the hassle of having to make a dozen different payments to all their different credit providers by themselves. Doing so can leave a lot of room for mistakes, and that can be very serious.

Normally, the consumer simply makes one payment of a consistent, easy to remember amount each month that covers all their debts. The PDA will then split up that one payment into all the smaller amounts that need to go to different credit providers.

PDAs charge a small fee each month to help consumers move money around. That’s pretty normal, as we all know, making payments from one account to another costs money. If you have had a few debit orders set up on your accounts, then you know these can cost you a few rand each month.

At present, the fees for PDAs look like this:

If they make a payment for you of less than R100: R0 (free)

If they make a payment of more than R100 but less than R200: R5 per payment

If they make a payment more than R200 and less than R500: R10 per payment

If they make a payment more than R500: R15 per payment.

As you can see these are very reasonable fees for distributing (and accurately tracking) funds. In general, it will cost you less than 1% averaged over time to make use of a PDA.

Should You Use A PDA?

You do not have to use a PDA but most Debt Counsellors strongly advise consumers to do so.

Why would most Debt Counsellors advise you to use a PDA if you legally do not have to?

This is because of the complexities of the process. While it is possible to do yourself, you need to make sure you pay the exact right amount, on the right day, to the right reference numbers, tracking and recording each payment and all these factors can change over the duration of your debt review. Making a single mistake can cause a lot of trouble.

If you decide not to make use of a PDA to pay your credit providers then here are some things you will need to do each month yourself:

      • Make sure you know the exact amount that must be paid this month to that particular credit provider. The amount will change over time.
      • Make sure when you make the payment you take into account any payment fees for transferring the money as these fees may mean you short pay the account (which you can’t do even by a few cents). Rather over pay than under pay.
      • Make sure you have the correct bank reference number. Often your old reference numbers and the account you paid money into will no longer be correct. Banks often change accounts and reference numbers at the start of a debt review so get those details from the bank (your Debt Counsellor may be able to help)
      • Keep proof of every payment.
      • Send proof of every payment to your Debt Counsellor for their records.
      • Check your Bank statements to see that the payment is reflecting. Compare the balances to your debt review plan.
      • Pay your Debt Counsellor each month. Just because you decide to pay your credit providers yourself, it does not remove the need to pay your monthly aftercare fee to your Debt Counsellor.

The NCA allows credit providers to be paid directly by consumers, but the NCR does not allow Debt Counsellors to be paid directly by consumers.

Even if paying your creditors directly yourself, you may still have to make use of a PDA, especially for this purpose.

If someone asks you to pay them directly, make sure they have documented permission via the NCR in their terms of registration or by special dispensation from the National Consumer Tribunal to receive such direct payments.

Be very careful of people who tell you to pay them directly. Many scammers operate this way (which is why using a PDA is normally safer).

Most people who are in debt review make use of a PDA’s services since it makes their lives so much easier. Your Debt Counsellor will be able to talk to you about which one they like working with and why.