PDAs Increase The Success of Debt Review
IN A NUTSHELL
PDAs Increase The Success of Debt Review
It is tempting to do things just because you can. However, unless you are well equipped to deal with the risks of going it alone in the debt review industry, you should rely on industry, accredited experts. The National Payment Distribution Agency (NPDA) is a leading, accredited payment agency in the debt review industry, adding value by developing software and systems that ease the flow of information and payments between Debt Counsellors, attorneys, credit providers and consumers.
PDAs – What Are They?
Payment Distribution Agencies (PDAs) assist consumers to distribute debt review payments each month with ease and accuracy to creditors and also assist Debt Counsellors to make proposals and plans for these distributions. This allows consumers to make one easy payment for all their debt and the PDA will split it up according to the plan of the Debt Counsellor and make sure it gets to the right accounts with the right references.
The amendment to the National Credit Amendment Act (NCAA2014), effected on the 13th of March 2015, recognise the value that Payment Distribution Agencies add to the debt review industry as a whole. PDAs assist Debt Counsellors and consumers navigate the complexity of the business of debt counselling and simplify this. “Since the NCAA2014 came into effect, we’ve seen more consumers pay through a PDA. This is confirmation that consumers and DCs are seeing the value,” states Kedilatile Legodi, Manager of the Debt Counselling Department at the National Credit Regulator (NCR).
As A Consumer…
As a consumer, you may choose to make payments to your credit providers directly either in cash or EFT, without the assistance of a PDA. However, the more creditors you have, the greater the risk that you may default and prejudice the debt review process. Debt review is a complex, tightly regulated process. If you choose to navigate the system on your own, you need to be well aware of your responsibilities and risks. You are responsible for making sure that all your debt repayments are paid accurately, on time and correctly referenced. Debt repayments vary for reasons, such as balance adjustments and interest fluctuations. If an amount is short paid, incorrectly paid, or not paid on time, credit providers have the right to terminate the debt review agreement and attach your assets. You will need to send monthly proof of payments to your debt counsellor for record keeping. The ensuing admin burden escalates proportionately to the number of credit providers that you pay. Your Debt Counsellor will also require that their negotiation fees and aftercare fees are paid accurately and on time. Debt Counsellors will not issue you with a Clearance Certificate if after care fees are not fully up to date.
PDAs, like the NPDA, help you navigate this complexity by simplifying the process. They require one payment from you as a consumer and take care of distributing it to all your credit providers, accurately and on time. All payments are paid automatically based on pre-defined rules and in accordance with your debt payment plan saved on their systems. The PDAs additionally validate all debit orders and deposit receipts according to the bank’s rules of validation to ensure proper payment referencing. The NPDA also identifies incorrect or unscrupulous charges from credit providers and debt counsellors to ensure that all payments are made according to the agreed repayment plan and as per legal limits. Your debt counsellor and credit providers have access to all proof of payment reports. Should you run the risk of termination, for whatever reason, the PDA often mediates between credit providers and Debt Counsellors who have reached a stalemate in negotiations, thereby reducing terminations and the repossession of consumer assets. According to Keditatile Legodi from the NCR, “Debt review consumers have a poor track record when it comes to making correct and on time payments. PDAs support and instill consumer payment discipline, resulting in a much higher payment rate than if consumers are left to their own devices.”
As A Debt Counsellor…
Imagine you’re a Debt Counsellor running your business without the assistance of a PDA. For starters, you would have to devise your own debt review system to keep track of your consumers. You will need to calculate your proposals and payment plans, keep track of outstanding balances and deal with the complexity of cascading payments and interest fluctuations on your own. You will need to keep track of and correctly file all debt review forms, proposals, plans and documentation.
The NCAA2014 doesn’t allow Debt Counsellors to collect and distribute debt counselling payments, so you are reliant on consumers to make their payments correctly. Often consumers forget to pay, short pay, pay the incorrect amount or incorrectly reference their payments resulting in an increased risk of terminations. Over-indebted consumers have on average of 11 credit providers. You will need to collect and submit consumer proof (for every client) of payments for each credit provider. Kedilatile Legodi, confirms “the sustainability of the DC business is put at risk when DCs and consumers choose not to use a PDA. There is primarily a two-fold impact. Firstly, these DCs will have to employ more staff to follow-up on consumer proof of payments. They will need to call all their consumers to identify the defaulters as opposed to relying on the default payment reports provided by a PDA. Secondly, they will struggle to collect their DC fees and will need to employ extra staff to follow-up on the collection of their DC fees. The ultimate impact will be on a DC’s finances; costs will increase as will the number of defaulting consumers.” All this extra work makes it difficult for you, as a DC, to focus on debt counselling and on growing your own business.
Helpful Software
PDA’s enable Debt Counsellors to run successful debt counselling businesses by providing a comprehensive suite of products and services that enable compliance and facilitate information and payment flows. The NPDA, for example, has developed its own sophisticated, proprietary debt counselling software called Care Premier. Care Premier caters for all aspects of debt counselling (proposals, including DCRS proposals, consent orders, legal processes and documentation, payment plans, payment records, and reporting). It helps manage complex payment scenarios, deals with cascading payments and interest fluctuations, prevents and flags unscrupulous charging and ensures that payments are made according to debt review payment plans. Care Premier was recently recognised as the industry winner for software in the 2015 Debt Review Awards, placing it ahead of all other software systems.
‘Secure payroll deductions have a success rate of 98%.’
The NPDA has also introduced alternative payment collection mechanisms, like secure payroll deductions. Secure payroll deductions have a success rate of 98%. Stop orders have the next highest collection success rate of 92%. Reports to creditors and Debt Counsellors include proof of payment, payment default and payment age analysis.
Without systems like Care Premier, with business operations and call centres to support Debt Counsellors and consumers, the debt review industry would struggle to function efficiently.
PDAs Are Vital
PDA’s, like the NPDA, play a vital role in the industry, ensuring cooperation between the different players in the industry and supporting Debt Counsellors to focus on delivering the best possible service to over-indebted consumers.
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IN A NUTSHELL is brought you by the DCM Business Partnership Programme™, designed to support debt counsellors and consumers during the debt review process, in collaboration with the National Payment Distribution Agency (NPDA). For help, contact the NPDA on 0861 628 628. If you have suggestions for topics that you would like covered in future, please email them to info@dcmgroup.co.za
The NPDA was recognised as the industry winner for PAYMENT DISTRIBUTION and Care Premier as the industry winner for DEBT COUNSELLING SOFTWARE at the Debt Review Awards 2015.