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How Has Covid-19 & the Lockdown Effected Debt Counsellors?

New research from a Debt Counselling Association shows that:

  • 30% of Debt Counsellors totally closed during Lvl 5 lockdown;
  • Most saw a 70% or more drop in client applications;
  • Less than 20% received TERS payments for staff in April.

The Covid-19 Pandemic and national Lockdown hit all sectors of the South African economy hard, including those who are best poised to help consumers through such situations, Debt Counsellors.

Like everyone else, Debt Counsellors were forced to rush structural changes to try and operate remotely when lockdown was announced shortly before coming into effect. Some who thought the lockdown would only last a few weeks (it didn’t) did not take the needed steps to adjust fast enough and got caught. It seems they got stuck at home unable to run their business primarily online.

For a long time, most Debt Counsellors and indeed the National Credit Regulator (NCR) seem to have favoured dealing with debt review consumers face to face. While this seems antiquated in a modern digital world, talking about your debt situation can be hard and it can be difficult for Debt Counsellors to decern if they are missing any pertinent information without ‘looking the client in the eyes’ as it were. Now, with the pandemic it is clearly best to avoid any unnecessary risk and contact and dealing with clients virtually is the new standard. For some debt counselling practices, this has always been the way, with phone calls and emails being their primary way fo dealing with clients.

‘with the pandemic it is clearly best to avoid any unnecessary risk and contact and dealing with clients virtually is the new standard’

When lockdown hit it was the former (normally the smaller debt counselling practice) who struggled to make a speedy transition. Not the transition to working from home but the transition of finding clients who need help digitally. Larger firms with a strong digital presence and large client numbers were able to adjust faster and though they too faced drops in application numbers they still were able to promote their brand and services during lockdown.

DCASA Research

SA’s largest Debt Counsellor association has released some research they did into how Debt Counsellors were dealing with the lockdown and the figures seem pretty grim.

Over 30 % of Debt Counsellors did not make arrangements to operate during the initial Level 5 lockdown (and most of these for level 4 as well). Of those who were open around 50% of practices said their client applications dropped massively to less than a quarter of what they would normally be.

‘Over 30 % of Debt Counsellors did not make arrangements to operate during the initial Level 5 lockdown’

Consumers Unable To Pay

A third of all Debt Counsellors reported that the vast majority of their clients were not able to make their usual debt review payments. Almost all other Debt Counsellors reported that a good portion of their clients were struggling to pay what they initially were going to, through debt review, before the lockdown began. This makes sense as almost every industry and every business was impacted by the lockdown. Though some firms claimed TERS on behalf of their staff, many people simply did not get paid and others found that the TERS stopgap only helped provide them with food and electricity.

Even among Debt Counselling practices, there were challenges paying their staff during the initial Lockdown. Some claimed from TERS as well for their staff but in April only 18% received payouts. Many Debt Counsellors went to their landlords and asked for rental reductions during the lockdown but only 16% of those taking part in the research were able to get some form of rental reduction. For those smaller Debt Counselling practices that run from the counsellors own home there was less impact than for the firms with multiple Debt Counsellors and many administrative assistants.

Dealing With The Banks

When a consumer in debt review has a financial difficulty (short term or long term) the Debt Counsellor will commonly start to talk to credit providers about making either a temporary payment reduction or take the matter to court to adjust the monthly repayment amount further. Of course, during the initial levels of lockdown the courts were closed so, Debt Counsellors contacted credit providers, like the banks, about making changes to their clients’ payment arrangements. These changes were things like a 3 month payment holiday or payment reduction for a certain amount of months.

The recent research results do not paint the best picture of credit provider cooperation. Around 70% of Debt Counsellors said that they had struggled to get replies from credit providers and 65% said they got low levels of acceptances from those credit providers who did get back to them about proposed temporary arrangements.

‘In the USA over 1 million people have lost their jobs for 14 straight weeks in a row. Over 1 million each week’

Things Are Getting Better

As the lockdown has eased and as Debt Counsellors and their clients have been able to get back to some sort of work again things are slowly picking up. More Debt Counsellors are once again being able to help more clients who are getting close to the end of their payment holidays and short term arrangements with the banks. It is anticipated that there is going to be a small industry boom as a rush of clients reach out for assistance in the weeks ahead. Leading banks and credit providers have increasingly shown themselves willing to process short term payment arrangements for consumers under lockdown. So, things are getting better.

What is clear however is that for most consumers things are about to get a whole lot harder with the biggest recession in nearly 100 years brewing and job losses predicted across the board and set to affect millions. In the USA over 1 million people have lost their jobs for 14 straight weeks in a row. Over 1 million each week. We are likely to see unemployment figures jump locally. This will mean consumers will need help and Debt Counsellor are primed to try assist them through debt review (those that can weather the financial storm ahead themselves).

 

 

 

 

 

* To find out more about the Debt Counsellors Association Of South Africa visit their website on www.dcasa.co.za