Who Does a Debt Counsellor Work For?
Consumers who enter debt review are told that they will have to pay fees for the service. The fees are paid via a Payment Distribution Agent to their Debt Counsellor*. These fees would include a larger fee at the start of the process and a smaller monthly fee for after care services. Statistically, most consumers pay on average around R125 a month but the figure is dependant on how much each consumer repays on their debts monthly (as the fee is percentage based).
‘Most consumers pay on average around R125 a month’
The fees are allocated to the Debt Counsellor for the work they do at the start of the process (getting the matter to court) and then for monitoring, troubleshooting and eventually issuing a clearance certificate at the end of the process.
Since the fees come from the consumer and since the consumer chooses the Debt Counsellor does this mean that the Debt Counsellor works for the consumer?
Whose Money Is It?
Each month a consumer is repaying money towards debts they have with various credit providers. During debt review, the credit providers agree to have some of the money owed go to the Debt Counsellor rather than to themselves. It is the consumer’s money and yet at the same time, it is money the consumer is meant to give to the credit providers (ie. the credit providers money). So, whose money is it? Who is paying for the services of the Debt Counsellor? It can be argued both ways.
Regardless of whose money is covering the services of the Debt Counsellor, it is clear that there is often an imbalance of power between a consumer and a huge financial institution like a bank. This is one of the reasons why the National Credit Act is designed to help balance things in the favour of consumers who have for a long time been taken advantage of by massive credit providers.
‘it is clear that there is often an imbalance of power between a consumer and a huge financial institution like a bank’
As such Debt Counsellors are asked (by law) to help balance the rights of a consumer with the rights of credit providers. Especially since consumers often do not know what their rights are. Few consumers take the time to read the National Credit Act and Consumer Protection Act and the Magistrates Court Act and Prescription Act and Banking Act and similar pieces of legislation. Even if they did, they would have little time to actively study it as Debt Counsellors do.
Because consumers pick which Debt Counsellor to use (most of the time) and since they see that there are fees paid for the Debt Counsellor services from funds they pay and since they sign contracts with the Debt Counsellor it is natural to feel that the Debt Counsellor ‘works’ for the consumer. The National Credit Act, however, presents a somewhat more balanced view and indicates that the Debt Counsellor is in effect preparing court documents to make the life of a Magistrate (or judge) easier when hearing an application to restructure debt. The Debt Counsellor has what are called statutory duties as set out in the NCA. This introduces then a third party that the Debt Counsellor is responsible to.
Thus a Debt Counsellor could be said to work for all three parties: (1) The consumer who needs some extra help to balance their rights and signs contracts with them for certain services (2) the credit providers who are dependant on the Debt Counsellor to help get their funds back (it is their money after all) and (3) the courts who would like to have everything set out for them nice and easy when the matter comes to the courtroom.
A Balanced View?
Some may wonder if it is possible for a Debt Counsellor not to ‘take sides’ with one party or another, to favour one credit provider over another or the consumer over the credit provider? Others may wonder if the Debt Counsellor should perhaps not be the champion of the consumer? It certainly is never easy to maintain a balancing act in such a situation. Each party has distinct goals and motivations.
Debt Counsellors can look to the National Credit Act for direction as to their obligations and duties. This will provide them with a clear view of what to do and remove any possible bias in any direction. The Act favours neither party while still helping balance any possible imbalance of power and resources between consumer and credit provider. The Act asks that credit providers act in good faith and that consumers cooperate with their Debt Counsellor. Ultimately the NCA gives courts the power to issue orders in regard to debt restructuring.
With these thoughts in mind, consumers can be helped to understand that their Debt Counsellor is also the courts’ Debt Counsellor and even the credit providers’ Debt Counsellor (in their matter).
*The T&Cs of most Debt Counsellors, with the NCR, require that to receive any payment from a consumer they have to receive funds via an NCR registered PDA (even if they advise a consumer to pay their debts directly to their credit providers this condition would still hold true and would be a single payment of after care fees via a registered PDA). Debt Counsellors are able to ack the NCT to change their conditions of registration to amend this.