Starting Debt Review: Dates & Debit Orders
Are There Better Dates To Start Debt Review On?
When signing up for debt review a consumer begins a legal and logistical process with certain steps that have to happen within a certain amount of days. The Debt Counsellor has no choice but to meet these deadlines as they are required by law.
For example, after handing in a signed form 16 (application form) to a Debt Counsellor the Debt Counsellor has to notify the National Credit Regulator and they will add information about the consumer to the NCR Database. From there the info is passed along to the credit bureaus who will note the debt review, while it is ongoing.
These set time periods can impact on consumers in unexpected ways. It can even cause some challenges that need to be carefully navigated to avoid any unnecessary issues.
Paying Professional Fees In Month 1
At the end of the month in which the consumer initially signs up for debt review it is also traditional for the Debt Counsellor’s professional fees to be paid (these fees are self-regulated by the industry, since there are no official fees in the Act or Regulations but the fees are fair considering the amount of work and expense involved in helping someone get into debt review).
Depending on what the consumer pays, some or all the initial payment would be used for fees. If the consumer has many debts and pays a lot (eg over R6000) toward debt then it is possible that some of the first payment will go to the Debt Counsellor and the rest of the payment to the various credit providers.
The Ease of Using A PDA
One of the trickiest parts of transitioning into debt review is actually coordinating the change to all your debit orders and usual debt repayments towards your exiting debts and changing these to the new way of paying through debt review. The new payment method is super easy. The consumer makes one payment to the Payment Distribution Agent (PDA) and then the PDA splits up the payments as needed each month. Much simpler.
So, the arrangement is for the consumer to switch payments from their usual means to just 1 single payment towards all their debts via the PDA.
Before debt review, the consumer may have as an example: 7 different accounts, with different payment dates and different payment methods. Most debt repayments these days are debited off the clients’ bank account each month near the end of the month, traditionally after payday and near the end or start of the month. But this may be different for each account or debt. It can be a real mess. Until you begin debt review.
Where A Challange Comes In
If a consumer starts debt review right around the time of their usual debit orders it can be hard to get the banks and your credit providers not to take the usual debit orders and to switch to paying the funds to the PDA instead. It is a time of the month when caution is required so that you do not somehow end up making 2 payments for the same things at the same time. One in the “usual” pre debt review way and one via the PDA.
‘It is a time of the month when caution is required’
Now, it may sound easy to just cancel a debit order and ensure that the bank does not take the funds out of your account but sadly many people find that cancelling debit orders is often not as fast or effective as you may hope. Sometimes they go off even when you think they wont.
If you are signing up for debt review later in the month be sure to talk to your Debt Counsellor about how you cancel debit orders and arrange the new payment via the PDA. Cooperation between client and Debt Counsellor is key to ensuring no issues. If they ask you to fill in forms or send forms to a particular address then you should try to do this as fast as possible the same day.
A Helpful Tip
If you are concerned that your credit provider may still try take their usual debit order anyway then you can even ask your bank to refuse any such deductions (using something called a stop payment – which sounds similar to a stop order but is sort of the opposite thing entirely).
Some consumers even consider moving their salary payment into a different account (or different bank altogether) so that there are no funds for the bank or a credit provider to run off with.
If the Worst Happens
If you do end up paying to the PDA for the new arrangement and then a debit order goes off as well to one of the credit providers your Debt Counsellor will assist you in asking the credit provider to refund you. It is important to know this can take a few days. This can be a little stressful. Sure the money is not being wasted or lost but it can negatively impact on your cashflow at a time when you can no longer just reach for the credit card or dip into the overdraft any longer.
Good planning, good cooperation and swift action with the help and advice of your Debt Counsellor will help you avoid most issues.
When is the Best Time to Sign Up For Debt Review?
The truth is that the transition to a cash lifestyle and ending your dependence on credit is never going to be super easy. There is no better time to sign up for debt review than when you realise you need it. Regardless of the day of the month sooner is better when it comes to dealing with debt.