What is a Debt Review Flag?
Do You Have a Debt Review Flag?
If you’re under debt review busy getting special benefits from credit providers, you will see a temporary debt review flag on your credit report.
This flag or indicator tells credit providers that you’re already in a special process to repay all your debts and shouldn’t take on more credit.
While some people see it as a restriction, it’s actually there to protect you from making your financial situation worse by borrowing more.
Let’s discuss what a debt review flag is and why it is helpful to consumers and credit providers. We will also look at how to avoid scammers who promise to remove a debt review flag.
What is a Debt Review Flag?
When you are in debt review, there will be a short listing on your credit report that says so.
This is known as a debt review flag.
Being flagged for debt review simply means that a registered Debt Counsellor has (1) assessed your financial situation and (2) determined that you qualify for help through debt review. This gives you access to all the associated benefits and special concessions from the banks.
Since you officially need debt review, the Debt Counsellor then (3) notifies all your current credit providers, the National Credit Regulator (NCR) and via them all the credit bureaus in SA.
The credit bureaus then (4) capture that information and add it onto your credit report. This information on your credit report about your debt review is known as the “flag”.
It is a temporary listing that shares information about your debt review status.
Preventing Reckless Credit
This flag or listing on your credit report also helps prevent reckless lending by credit providers and can protect you from digging yourself deeper into debt which you cannot afford to repay.
How?
Many people fall into a pattern of trying to get more debt rather than looking for real solutions to challenges they face. Sadly, if you already have too much debt, digging yourself deeper into debt is not a real solution. It will simply make matters worse.
Should a credit provider want to offer you more credit they first have to draw a credit report and see what other debts you already have. They then have to check if you can really afford to make regular debt repayments each month on new credit.
If you are already in debt review and have special arrangements in place with all your existing credit providers, any new credit will mess with your budget and mess with your plans to pay off your existing debts.
‘Offering credit to someone who cannot really afford to repay that credit can cost a credit provider up to R1 million in fines’
So, when a credit provider sees that temporary listing of your ongoing debt review they won’t even break out the calculator and check if you can afford to pay even more debt. They already know you are focused on getting out of debt (not deeper into debt).
So, it protects them from breaking the law and offering credit to someone who cannot afford to pay the money back each month. Offering credit to someone who cannot really afford to repay that credit can cost a credit provider up to R1 million in fines.
You can understand why credit providers want to avoid such massive fines whether you are in debt review or not.
Removed Once All Your Debts Are Paid
The debt review flag or listing stays in place on your credit report until you complete the process and receive a clearance certificate confirming that you are debt free.
This clearance certificate can be issued by the Debt Counsellor handling your case (as registered with the National Credit Regulator). To do so, they have to get confirmation from all your credit providers that your debts are paid off (except for big home loans which don’t need to be paid off).
The Debt Counsellor then makes sure you are debt free and issues this official document.
The NCR and all credit bureaus are updated and soon the debt review flag disappears off your credit report as if it never existed.
Beware Scammer's Empty Promises
Scammers often target consumers already in debt review, calling, emailing, or messaging with false promises and offering to get the debt review flag removed…for a fee.
Sadly, social media is flooded by such scams and blatantly false offers to get you out of debt review or easily remove the debt review flag.
Scammers often claim they can remove the debt review flag quickly, letting you take out new credit even when you still have debt and can’t really afford new credit. And remember credit providers can be fined R1 Million for giving credit to people who already have too much debt or can’t afford it.
Scammers may claim they have “inside connections” or a “special legal process” that can get around the system. What they won’t tell you is that removing the flag without completing debt review is not possible and they’ll usually demand upfront payment before disappearing.
‘Falling for these scams can be a costly mistake’
Falling for these scams can be a costly mistake. You could lose the money you pay upfront, miss your expected debt review payments and then lose all the special benefits you get via the process.
It can often result in the banks taking new legal action against you for missing debt review payments and adding huge amounts of extra missed fees and charges.
Rather Talk To Your Debt Counsellor
If you ever see such adverts on social media or get a call from someone offering get out of debt review services, please beware.
Rather, talk to your Debt Counsellor about how you can really leave debt review (by paying off all your small debts). If you are struggling to keep up with your debt review plan, then no one is better positioned to help you stick to the plan that your Debt Counsellor.
The debt review flag on your credit report is a protection. Both to the credit provider (so they avoid R1 Million fines) and to consumers in debt review (as it protects them from messing up the special repayment plans they have in place).
Debt review is a slow and steady process designed to realistically get you out of debt. Avoid anything that can mess with the special plan you have in place to pay off your debt.