Making Your Debt Review Work
Once you have an idea who your Debt Counsellor and attorney are there is another important party to a successful debt review. Since debt review is about paying money to your creditors we take a moment to talk about the people who handle your money during the process: You Payment Distribution Agency.
As per changes to the National Credit Act consumers do have the option to manage their monthly payments towards their creditors themselves throughout the debt review process. While simple sounding, in practice this is not really the case. Some creditors change account reference numbers when consumers enter debt review meaning if the consumer pays as they did in the past the funds will not be allocated to the correct account. Another challenge is that the debt restructuring repayment plan as designed by the Debt Counsellor will normally call for differing amounts to be paid on different months to the credit provider over time. Many consumers find this very hard to manage. In fact, most would like to make a single payment toward their debt and then rather focus on the month to month challenges they face. This is where service providers like PDAs come in. In the past some had issues with PDAs as they were not written into the NCA. This objection is now firmly in the rear view mirror now as the amended National Credit Act clearly makes provision for the registration of PDAs and outlines their services.
For many Debt Counsellors their terms and conditions of registration (with the NCR) require that they not accept funds directly from a consumer. The terms and conditions naturally do not extend to the consumer but are accepted by the Debt Counsellor. In such cases, even if the consumer is paying their creditors directly, consumers have to make payment of their monthly aftercare fee to their Debt Counsellor via a third party such as a PDA.
Step 3 in making sure you have a successful debt review is to find out who your PDA is going to be. Obviously under the Consumer Protection Act you can decide which of the 3 main PDAs you would like to use but normally your Debt Counsellor will have one of the three that they work with for all their clients. This keeps costs down for them and allows them to work closely with one firm which reduced their workload as well. Normally consumers go with which ever PDA their Debt Counsellor is using at the time and recommends (Debt Counsellors can switch PDA).
One Easy Payment
Consumers will make payments (of the one set total debt restructured monthly payment – which is normally much less than what they were paying in the past) directly to the PDA. Your Debt Counsellor will provide you with those banking details. Make sure it is not into the Debt Counsellors personal account but to one of the 3 current NCR recognised PDAs (more may register soon) DC Partner PDA, Hyphen PDA, NPDA (from DCM Group). Each have websites you can visit for more info.
The PDA will provide you with a monthly statement tracking your payments and the rough balance that is worked out according to the computer system. Watch out though this is not the figure from the creditors. The creditors systems sometimes don’t get adjusted fast enough or even at all until the Debt Counsellor complains. While the statements will track payments it is good to know that normally creditors try to add all sorts of minor fees and charges which mess with the final balance when it comes time to close out an account. This has lead to many issues across the industry and can lead to consumer disappointment when they think an account is paid up but the creditor demands more money. The NCR recently issued a guideline about these end balance issues and basically said that consumers must just pay more…
The PDAs keep proof of every payment (something consumers forget to do if making payments themselves) and are able to prove how much was paid and when. Consumers will pay a small fee for the use of a PDA (just like you would normally pay for various debit orders and whatnot for all your credit accounts before entering debt review). The fees are set by the DTI and are adjusted from time to time.
Find out who your PDA is.
Make sure you are paying them directly and get your rough guide monthly statement.
[another step to a successful debt review tomorrow]