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Reducing % While in Debt Review

When a consumer enters debt review their Debt Counsellor will contact all their credit providers and get all their latest figures on their various accounts together. Armed with this information, they can look at different ways for the consumer to repay the debt.

Once the Debt Counsellor has helped work out a new monthly budget with the consumer (which takes into account monthly saving towards annual expenses) they will know how much money is available to repay debt.

When The Matter Goes To Court

A Debt Counsellor can then make a recommendation to the court on how the debt can be settled over time (normally a longer time period). The court is empowered by the National Credit Act (NCA) to decide to accept or adjust the proposal and do several things like: delay payments on one or more accounts, reduce the amount being paid to each account or extend the time it takes to repay the debt. The NCA is however silent on the topic of interest rates. Thus a court cannot just adjust the rates simply because they want to.

However, many credit providers want to assist their clients to get out of debt as soon as they can so that they can begin using credit again. Thus they will often volunteer to lower the interest rates from what they were before under the contract. There are no rules that force them to do so but they can, if they want.

Alternatively, they don’t have to agree to any changes and can let the debt run to the induplum (double the amount) limit which when reached means that the consumer is finished with their obligations on the account. Or they may simply let the account take several years to pay off without the amount even going past induplum (or it may not apply).

Some courts are happy to include these new arrangements on interest rates into their court orders for consumers while others prefer not to mention the interest rates at all as they want to avoid giving the impression that they are the ones changing the rates rather than the credit providers (who are the ones that suggested it). Regardless, the credit providers can adjust their own in-house systems to calculate the interest portion at whatever rate is agreed.