Possible Legislation Changes Could See Admin & Debt Review Lumped Together
The Administration process was a popular debt solution, in the past, but due to a lack of updating of legislation, not raising the amounts that can be included and the introduction of better debt relief processes it has fallen out of favour.
The process is also a costly one for consumers. It has a poor reputation for abuse, with some consumers overpaying their debts for many years due to unscrupulous or incompetent practitioners.
The limit of debts which can be included, in an Administration order, is relatively low. Many consumers quickly end up with more than R50 000 in debt due to the availability of credit and the decreased value of the Rand due to inflation. Other processes like debt review allow for the inclusion of debts of many millions of Rand and larger debts like home loans or vehicle finance.
‘Credit providers too have found that they do not recover funds as consistently and efficiently as via processes like debt review’
Credit providers too have found that they do not recover funds as consistently and efficiently as via processes like debt review. Admin payments are usually made every 3rd month as opposed to debt review payments which are made monthly. Payments in debt review are also generally made via a Payment Distribution Agent (PDA) who is regularly audited by the National Credit Regulator to ensure payment integrity. This provides consumers and credit providers with peace of mind and the regular reduction of the outstanding balances (avoiding “issues” with runaway increases in the debt and hitting the In Duplum limit).
For some time legislators have been looking into the option to either dump Administration orders entirely or to perhaps try to combine it and adjust it to match other more advanced processes, like debt review. One solution that has been discussed is trying to create a Hybrid debt review and Admin process.
A Formal Discussion Paper
The South African Land Reform Commission has been looking into the topic and has issued discussion papers on the topic (for comment).
The stated purpose of the papers is (to quote): ‘ This discussion paper evaluates whether the legislative provisions with regard to administration orders should be repealed in view of the current credit regulatory environment and consumers’ access to debt review‘
‘For some time legislators have been looking into the option to either dump Administration orders entirely or to perhaps try to combine it and adjust it to match other more advanced processes, like debt review’
The Debt Rearrangement Act
The most recent paper was released late last year and looks into suggestions to create a new Act called the Debt Rearrangement Act.
This Act would amend and replace the sections about Administration (in the Magistrates Courts Act) and debt counselling (in the National Credit Act).
The proposed bill would see all current Administration practitioners (who qualify) become Debt Counsellors and report to the National Credit Regulator (NCR).
Other short term options are looked at in the discussion paper such as increasing the amounts that can be included in an admin order to temporarily allow debts of up to R300 000 and ensure that the Administrator only deals with clients who live near their offices (within 50Km).
‘The discussion paper also looks at and recommends many changes which would seriously impact on the current debt review process’
The discussion paper also looks at and recommends many changes which would seriously impact on the current debt review process and how Debt Counsellors operate. So far a small number of Debt Counsellors have been able to give some feedback on what is being discussed but since the discussion started around the topic of Admin orders there was little initial consultation with industry practitioners into possible refinements. There are as a result some pretty big glaring issues in the discussion papers.
Read More About These Plans
Debtfree Magazine Issue #5 (out later this month) will look into the discussion paper in more detail and give you the highlights (and low lights) of the suggestions made. Be sure to read that here, for free, on the site or on the various reading platforms where you can find the magazine each month.