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New Task Team To Look At Debt Review

Years ago, a special NCR task team helped get the jammed wheels of debt review turning again.

The announcement of a brand new task team has many in the industry very excited, and it might result in benefits for consumers, credit providers, the NCR, NCT and Debt Counsellors.

A Little History For Conext

When debt review started back in 2007, the only guidance people had was the wording of the National Credit Act and the regulations.

While that may seem like plenty, it quickly became obvious that not everyone understood the words in the same way.

That’s not uncommon for new legislation. Every court across the country is full of people fighting over various matters, using the exact same set of laws, some of which have been around for decades. The question is: who has the correct understanding? This was true in the debt review space as well.

‘not everyone understood the words in the same way’

Though lots of people signed up, not all Debt Counsellors did things the same way. Not all credit providers responded in the same way, or used the same forms. The courts all had different ideas about debt review (some still do) and it was basically chaos.

As the number of consumers who signed up began to grow, many people were left with their matters unresolved. A serious problem was brewing and by 2009 everyone could see something had to be done, but what and how?

The solution was for a small NCR guided task team to (1) identify everyone involved in the process and what they were responsible for, (2) identify the various problem areas and (3) make suggestions on how these could be worked out if everyone just played nice.

The suggestions required everyone to meet in the middle, and make some concessions, but the end result was a plan to overcome most of the issues slowing things down.

The Current Debt Review Landscape

At the moment, the industry is facing many different challenges. Some are nuanced and seem small, but have a big knock on effect and others are so big no one knows what to do about it.

The Economy in General

There is a massive need for debt stressed consumers to get help. Millions of people across the country are skipping debt repayments every month.

High interest rates and high levels of indebtedness mean consumers are not going to the shops and spending money. Businesses are starting to worry if they will make ends meet each month, the money is just not moving.

Credit providers are struggling to find consumers to lend more money to, as most people cant realistically afford more debt. Young people are not getting jobs, and as a result can’t be given credit. Credit Providers need to recover their existing credit from non-paying clients and want more credit active clients.

In the debt review space, there are some key issues as well.

For example, at present there are around 1.3 million people who have signed up for debt review but have not finished it. Of those, it seems only 245 000 are actively getting help from a Debt Counsellor, and paying off their debts via a PDA each month. So… how do you help the 1.1 million people to get back into regularly paying their debts?

Consumers who sign up and then quickly change their mind find they are “trapped” with a debt review flag at credit bureaus, and get cut off from their usual credit cards etc.

People “trapped” in debt review limbo for a number of years due to falling off the program, are being scammed by people offering ‘get out of debt review’ services or some sort of debt mediation scam. Many are losing thousands of rand to such scammers.

Debt review consumers stay out of the credit market for 5 years in general. Yes, they are paying off their debts but credit providers would like to see them back in the normal credit market sooner, if possible.

Consumers who enter debt review often have to wait years to pay off even a small debt. This is due to the way payments are spilt up. No quick and easy wins, just a long grind for 5 years.

People in debt review currently can’t get a cheaper car or cheaper house which they might actually be able to afford due to concerns over offering debt review clients new credit, and that being called ‘reckless’.

PDAs who supply services to consumers and Debt Counsellors alike have not had realistic fees for several years. In retrospect, past changes were overly harsh and cut their revenue to unsustainable levels for the services they offer. If this is not addressed soon, it will impact the 245 000 people trying to pay off their debt.

 

The list goes on and on, and once everyone has had their input, the Task Team will have its work cut out for it. What to prioritise, what to focus on, which items have simple solutions and which are more complex and may take time?

The idea currently seems to be that the Task Team will suggest the fast and easy wins, and other items may go on to be discussed in more detail over time at CIF.

What is the CIF?

Many think of the NCR’s Credit Industry Forum as a sort of task team by committee. It is a group organised by the Regulator who meet and discuss possible solutions and changes to the NCRs guidelines on industry topics.

The members come from different parts of the industry, such as Debt Counsellor and credit provider associations. These are parties actively looking to make the process faster and easier for consumers.

The CIF has tackled many issues over the years, and the NCR has put out several guidelines based on those discussions (where there was some sort of consensus).

While not legally binding, these guidelines are often adopted by the majority of industry parties, and this can help overcome common problems (just like the Task Team is designed to do).

There has been discussions about an annual Task Team to look for quick solutions with other matters being handled by CIF.

How Will It Work & When

We are still waiting to hear more details, but the proposal for the Task Team was well received at the last big CIF meeting, and given the go ahead.

In the past, the Task Team consisted of 3 or 4 very experienced industry experts (so not a big committee) who were able to talk to others in their field, and drum up support for the initiatives suggested.

One of the possible goals of the Task Team is to be able to present some sort of report to the NCR which might then make its way to the DTI in the months ahead. With new role players at the DTI, there is hope for fresh eyes to prioritise changes to the National Credit Act or regulations in the future.

How Will the NCR Task Team Help You?

This may just sound like a bunch of boring meetings, but it will probably impact on everyone involved in debt review, from consumers to Debt Counsellors in one way or another.

‘it will probably impact on everyone involved in debt review’

The Task Team will hopefully be able to move faster than most of the CIF committees in the past. Rather than going months between meetings, a focused series of quick meetings and input from all across the industry might see some much needed changes come in within a year.

Credit Providers may find ways to get clients back into the normal credit market faster.

Credit providers may find Debt Counsellors more readily able to make use of the DCRS system or additional versions of it.

Debt Counsellors may find they are able to attract more clients due to improvements in the process.

Consumers with a debt review status at credit bureaus may find some relief or a way back into meaningful debt review.

PDAs may find some promise of a more sustainable business model.

Attorneys may find the courts are helped to handle matters faster or more work at the NCT.

Insurance providers may see additional support for policy substitution.

Consumers in debt review may find they are able to stay in the process throughout because of a reviewed look at the cost of living increases while in the process.

3, 2, 1 Lift-off

Whatever happens there is now a feeling of optimism in the industry which has been lacking.

All parties who help consumers through debt review are excited that things might once again be easier, after the Task Team has done its work.

Though it won’t be perfect, and unlikely to be the last time such measures are needed, it is likely that debt review is soon about to get a nice boost.

All parties are encouraged to submit suggestions and feedback to the NCR Task Team when it’s requested.