NCR Shuts Down Mediators Doing Debt Counselling
Debt Mediators Shut Down
Many consumers were offered debt assistance by Major Authorised Debt Mediation (Pty) Ltd. The company was offering the services of a Debt Counsellor and an Alternative Debt Resolution Agent. The NCT just shut them down.
Major Authorised Debt Mediation (Pty) Ltd, who later rebranded to MSR Financial Solutions (PTY) Ltd, was based in Bloemfontein, in the Free State. They offered to assist consumers to deal with their debt. They said they would do this through ‘mediation’*.
What is Debt Mediation?
For many years there has been some confusion about what ‘debt mediation’ is. The original debt mediation offers were made by the NDMA, an organisation that it was later revealed, by the head of Standard Bank’s debt review department, was put in place to draw people away from the newly legislated debt review process.
Many companies or attorneys are quick to offer such services to consumers saying that they will help them get better offers from their credit providers (reduced monthly debt repayments).
MSR Financial Solutions (Major Authorised Debt Mediation) was investigated by the National Credit Regulator (NCR) for a number of concerns. The company had been using the NCR’s logo on their website without permission from the regulator. This gave people the impression the NCR supported what they were doing.
The Company had also been telling people they could review their debts and then help them get restructured debt repayments. These are the services that only a Debt Counsellor is allowed to do by law.
They also were offering general dispute resolution between credit providers and consumers. These are the services that only an Alternative Dispute Resolution Agent (ADRA) is allowed to do by law.
The NCR then referred these breaches in the National Credit Act to the National Consumer Tribunal (NCT) and asked that the NCT fine them or shut them down.
You Have To Register
Many companies and attorneys mistakenly feel that they can offer such services without being registered with the NCR to do so. This is not correct. Such individuals and companies would have to register with the NCR just as someone who wishes to offer others loans and charge fees has to register to be a credit provider.
‘This all changed with the introduction of the National Credit Act in 2007’
Though there is a long history of people in the past of offering loans without having to register with anyone or companies offering to help people “sort out their debt problems” without registering. This all changed with the introduction of the National Credit Act in 2007.
Debt Restructuring: A service through a Debt Counsellor where a court is asked to help with multiple debts (particularly where the consumer cannot pay the full monthly instalments).
Dispute Resolution: A service through an ADRA where they help a consumer resolve a fight with one credit provider about a particular matter (eg. balance on an account).
The NCT ruled against the company and they were fined R50 000. That was just the start. They were also ordered to repay all their clients the fees and charges they have ever paid. This essentially puts them out of business.
Huge Victory For Debt Counsellors & ADRAs
The NCT ruling is a major victory for the NCR and Debt Counsellors who are concerned about scammers who offer ‘mediation’ services and take trusting people for a ride by pretending to offer services that only Debt Counsellors really can offer.
It remains to see if the matter will now be appealed to a higher court.
*there are many legitimate forms of mediation. Mediation about many different debts, where the goal is to reduce debt repayments must, however, be done through a registered Debt Counsellor.