DEBT COUNSELLING UNISA SEMINAR 07 NOVEMBER 2014 BY KEDILATILE MALAKALAKA

Transcription

1 DEBT COUNSELLING UNISA SEMINAR 07 NOVEMBER 2014 BY KEDILATILE MALAKALAKA

2 STRUCTURE OF PRESENTATION 1.What is debt counselling? 2.Who conducts the debt counselling process? 3.The debt counselling process 4.Debt counselling fees 5.Payment Distribution Agencies 6.Consumer rights and responsibilities 7. Tips on debt management 2

3 WHAT IS DEBT COUNSELLING? WHAT IS DEBT COUNSELLING? Debt counselling is a debt relief measure provided for in the National Credit Act. This process is intended to assist over-indebted consumers struggling with debt, through budget advice, negotiation with credit providers for reduced payments and restructuring of debts.

4 WHAT IS DEBT COUNSELLING? (continues) WHAT IS OVER-INDEBTEDNESS? A consumer is over-indebted if he/she cannot service his/her debts in a timely manner as agreed with the creditors. The following are some of the indicators of over-indebtedness: You borrow money to pay other debts; You use your credit card and overdraft facilities to pay debts; buy food and other necessities; You skip payments on some accounts in order to pay others; You receive letters of demands and summonses from creditors and/or lawyers; You have judgments granted against you.

5 WHO CONDUCTS THE DEBT COUNSELLING PROCESS? Debt counselling service is only offered by registered NCR debt counsellors. Prior to registration, debt counsellors have to successfully complete a debt counsellor training course, satisfy prescribed education, experience or competency requirements and display ability to manage their own finances. Consumers can identify debt counsellors by checking the registration certificate which will have the DC s name, surname, id number and NCR registration number as well as a window decal which has the NCR logo. If for any reason the consumer is uncomfortable, he/she can contact the NCR to verify the registration details. 5

6 DEBT COUNSELLING PROCESS A consumer who is over-indebted can approach a debt counsellor of choice. NOTE: In terms of the NCA, the DC process should be finalised within a period Eachstageoftheprocesshasprescribedtimeframesthatallpartieshaveto 60 business days. adhere to. Within this period, credit providers cannot issue letters of demands, summonses or enforce legal steps as the consumer will be protected. NOTE: Credit agreements where legal steps have already commenced (sec 129 letter, summons, etc) will be excluded from the debt counselling process. This provision has been amended by the National Credit Amendment Act( the NCAA) and specifies that s129 notice is not the start of legal proceedings but an opportunity for the consumer to explore avenues listed on the notice to remedy the default. 6

7 DEBT COUNSELLING PROCESS (continues) A debt counsellor will: On first consultation assist the consumer in completing the application (Form 16), request statements of accounts, explain the process in detail and disclose the applicable fees in writing. Inform all credit providers and credit bureaus of the debt counselling application by issuing Form 17.1 within (5)five business days of accepting the application from a consumer. A credit provider will: Send a certificate of balance (COB) to the debt counsellor within (5)five business days of receiving the notification for debt counselling application (Form 17.1); A credit bureau will: Place a debt counselling flag on the consumer s profile.

8 DEBT COUNSELLING PROCESS (continues) NOTE: If a creditor does not send the balances within the prescribed days the debt counsellor will proceed with the information provided by the consumer on application. A debt counsellor will: Conduct an assessment to determine if the consumer is over-indebted and arrive at the disposable income(amount available) to repay debt within 30 business days of application; After the assessment, either reject the application (if not found to be overindebted) or accept (if found over-indebted) and communicate the outcomes with the consumer, credit providers and credit bureaus by means of Form 17.2; NOTE: For rejected applications consumers can apply to be declared overindebted directly with the magistrate within 20 business days of rejection by the debt counsellor. 8

9 DEBT COUNSELLING PROCESS (continues) If your application is accepted, restructure your debts and make a proposal to your creditors; If all credit providers accept the proposal, prepare a consent order. If one or more creditors decline the proposal, refer the matter to the magistrate court for a rulling. If the court order is granted advise the consumer and send the order to consumer and all credit providers. NOTE: The consumer will have to make monthly payments WhenalldebtshavebeensettledandaDChasverifiedthat,issuea as per the order until have been paid up. clearance certificate and inform the credit bureaus in order for them to remove the debt counselling flag and expunge all information relating to consumer s debts which were re-arranged. 9

10 DEBT COUNSELLING FEES An application fee, limited to R50.00,payable directly from the consumer; If application is rejected a fee of R300.00(excluding VAT) is payable; If application is accepted,a once off fee of the lesser of the first instalment of the debt re-arrangement plan or a maximum of R (excluding VAT); A monthly after-care fee of 5% (VAT excl) of the monthly instalment up to a maximum of R (VAT excl), for a period of 24 months, thereafter reduce to 3% (VAT excl) of the monthly instalment, to a maximum of R (VAT excl), for the remaining period of the debt re-arrangement plan. Payment of the monthly after-care fee is to commence in the second month 10

11 DEBT COUNSELLING FEES (continues) Should a debt counsellor fail to submit proposals to credit providers or refer the matter to Court within 60 business days from date of the debt review application the debt counsellor has to refund 100% of the fee paid by the consumer (excluding the application fee). A legal fee for a consent order is R This fee for the consent order may only be deducted in the second month of debt review. Legal fees for cases where the matter is opposed by the credit provider, need to be separately negotiated with the client on application. Payment Distribution Agencies' fees are charged at 3% of the distributable amount with a minimum floor limit of R50 and a cap of R500 (VAT excl). 11

12 PAYMENT DISTRIBUTION AGENCIES(PDA) We currently have (3)three accredited PDA s namely, DC Partner, Hyphen, and NPDA. These are agencies accredited by NCR to collect and distribute debt counselling funds to debt counsellors and credit providers. The NCAA makes it a compulsory provision for all PDAs to be registered by the NCR and consumers can elect to pay directly to credit providers. NOTE: Please be wary of DCs who are using their own payment distribution agencies. Always enquire if not certain.

13 CONSUMER RIGHTS AND RESPONSIBILITIES A right to apply for debt counselling. You must have disposable income to enable offer for reduced payments. Consumers married in community of property will have to both apply for debt counselling. A right to be provided with reasons for rejected application. A right to be provided with a written disclosure for applicable fees. A right to receive monthly distribution statement from DC and PDA. NOTE: TO BE UNDER DEBT COUNSELLING DOES NOT PROVIDE FOR PAYMENT HOLIDAY AND YOU CANNOT APPLY FOR FURTHER CREDIT.

14 CONSUMER RIGHTS AND RESPONSIBILITIES Consumers responsibilities are: To act in good faith by disclosing all information truthfully at the time of application. To co-operate with the debt counsellor. Not to apply for further credit whilst under debt counselling. Make regular payments from the first month of application. Follow up on your monthly payments with your debt counsellor. Inform your debt counsellor of any change to your financial circumstance. 14

15 TIPS FOR CONSUMERS ON DEBT MANAGEMENT Do not ignore your creditors, reduced payment is better than nothing at all. Be proactive and approach your credit providers when you notice over-indebtedness indicators. If things are bad, then it s time to go on a financial diet. If you fail to plan, you are planning to fail; (Always budget and stick to it). Where possible, do not borrow, downgrade and cut out those things that you do not need. Know what's coming in and going out of your bank account. Bad decisions are made during good times, avoid being carried away. SAVE,SAVE,SAVE,SAVE for rainy days.

16 16 THANK YOU!!!