NCR Monitoring Visits Turn Sour

NCR Use Warrants For Monitoring Visits

The National Credit Regulator (NCR) register and monitor all credit providers and Debt Counsellors. On a regular basis staff members from the NCR go out and visit registrants and ask questions and review some client files in an effort to see if the credit provider or Debt Counsellor is offering services in line with their terms and conditions of registration. Recently the NCR sent out a circular complaining that some firms were not sticking to appointments and fobbing them off when they arrived. It seems this may have prompted the use of warrants (of search and seizure) in the case of around 12 large Debt Counselling firms in the Western Cape. During last week the NCR sent out 3 teams to visit various Debt Counsellors over a few days and spoke to staff and asked for some client case information.

Not too long ago the NCR announced that they were unable to carry on with the promised Debt Counselling fee structure review via an outsourced firm due to the fact that they had spent all their budget till next financial year. It does seem that there were some funds fortuitously available to hire at least some outside service providers however, as one was used in these monitoring visits. The firm was contracted to collect the mountainous pile of data. It is not clear if they have been asked to do any thing with the data however. When the visits first began, it seems that the NCR were not totally prepared for the amount of data that they were asking for. Debt review is a very document heavy process. That said, it is reported that they have taken information,  amounting to hundreds of thousands of pages worth, off servers and computers at the firms visited. What is notable is that the information is often recorded or readable only via software developed specially for the companies themselves and cannot be read other than with the same programs. This will no doubt make it very difficult for the NCR to actually go through all the information taken. This may be possible if the NCR were to purchase licences for the software from the development companies. Once again there would be costs involved.

One Debt Counsellor was concerned that data analysed might be taken out of context without the records of accompanying telephone calls and emails regarding each matter. Especially in light of supposed comments from a member of the NCR team that information might be used “against” the Debt Counsellor.

We asked the NCR for more information about the visits as they began to cause ripples to run through the industry. Lesiba Mashapa, Company Secretary at the NCR, was only able to tell us that “the operation is part of the NCR’s monitoring of compliance with the Act by debt counsellors“.  While that says little, it does tell us that the NCR saw this as an “operation” rather than normal visits. The fact that the police were on hand during these visits, lends itself to the tone of a raid or at least indicates that the NCR felt it likely that they would have a hard time to get in at some of the firms visited. It has been reported that the warrants used did not cover all the things the NCR asked for in their visits. Fortunately, it seems that the companies were only too happy to assist the NCR and provided them with whatever they asked for rather than fight with them. This makes sense as the NCR are empowered under the National Credit Act to visit and monitor anyway, warrant or not. Unfortunately it does seem that the heavy handed nature of the visits has damaged the relationships that the NCR has built up with many of these firms. This is of concern since the NCR ask many of these firms to assist in regard to the Credit Industry Forum (CIF) which helps deal with issues in the industry not directly covered by the National Credit Act. Now the same Debt Counsellors will probably be asked to sit across the table from some of the same NCR staff and work together to address important industry issues while the memory of these sudden visits sits like an elephant in the room.

The NCR reportedly spent a lot of time in these visits sitting down with staff of the companies (many of them Debt Counsellors) and asked them questions about the day to day operation of the firms and where their company’s leads come from and what qualifications they have. Recently the NCR have been demanding higher levels of competency from the staff of larger firms particularly those who use what is commonly called a call centre setup. The Debt Counsellors Association of South Africa performed a study in 2014 which showed that, due to low profitability in debt counselling firms, many firms staff members were receiving lower pay or were less qualified than in the past. They pointed to a need to adjust the debt counselling fee structure as a solution. The NCR want to ensure that only Debt Counsellors perform the functions of a Debt Counsellor. This is a very valid point. Obviously, Debt Counsellors are allowed to have assistants and staff who perform administrative functions for them but what the NCR (and Debt Counsellors) want to avoid is the situation where a non qualified person is giving advice or signing off on documentation which only a Debt Counsellor should handle.

Mediation Scams

At present, there is a HUGE issue in South Africa where unregistered people hold themselves out to offer debt help or mediation. They then promise to perform the function of a Debt Counsellor and negotiate with credit providers to get monthly debt repayments reduced. Some have tried to hide behind the guise of Alternative Dispute Resolution Agents (ADRA). This is a new role brought about by the NCA but no one is really sure what exactly an ADRA can do. All we know is that it is expensive to be one. What is clear is that they cannot help consumers negotiate reduced payments with various credit providers when they are in debt trouble. That is what a Debt Counsellor does according to the National Credit Act (NCA). Also it is clear that owing someone money every month which you cannot afford is not a ‘dispute’ it is over indebtedness. Lesiba Mashpa says:”Only registered debt counselors should negotiate repayments on credit agreements with consumers when consumers are over-indebted“. Mention of voluntary or consensual reductions on multiple debt repayments is made in the NCA in Section 86, which is a section all about Debt Counsellors, so it is clear that companies who hold themselves out to offer this sort of help but don’t have a Debt Counsellor are breaking the law. That said, none of these types of firms were visited during this operation. The focus seemed to be on the big Debt Counselling firms in the Western Cape only.

The New Norm?

What has become clear is that there have been no similar visits in Gauteng (where the NCR are head quartered) as yet. Whether these will follow and the use of warrants will be the new ‘norm’ will soon be evident based on what the NCR do next.