Concern as consumers are placed under review without their consent

South Africa’s National Consumer Commission (NCR) says it has received a number of complaints from consumers who have been placed under debt review without their consent.

The NCR has called on consumers to do their homework before agreeing to undertake debt review to ensure that they know what they are getting themselves into.

Debt counsellors who do not abide by the law run the risk of incurring the legal costs to remove consumers from the debt review process.

The latest Credit Bureau Monitor has revealed that the total outstanding consumer credit balances as at December 2022 was R2.26 trillion and the number of impaired records or those who are three months in arrears with their debt repayments is R19 million.

Experts say if consumers do not make payment arrangements with credit providers, a judgement can be issued against their name, and this could last for three years.

The debt review process can protect consumers against their creditors from reprocessing your assets and a debt counsellor can also negotiate lower monthly repayments and extension of repayment term.

Paul Slot, Managing Director at Octagon, says he thinks “the major issue is that there’s still 12 to 14 million consumers that are over indebted and not every consumer wants to be assisted and they are looking for solutions.

“One of the solutions they prefer is actually get more loans to solve their problems and that’s obviously not going to solve their debt position. It will just make it worse. So from a consumer point of view, debt review is probably the best solution.

“Consumers are not naturally following that route, notwithstanding the fact that debt review is possibly the only solution that they’ll get to be debt free.”

But there have been instances where consumers find themselves on debt review under the false pretence, assuming that they were undergoing debt consolidation.

Consumers are advised to read the form 16 to know what they are getting themselves into before signing on the dotted line.

Madikwa Phosholo from the National Credit Regulator says “the consumer needs to be careful in terms of the type of information that they share telephonically because most of these are call centres that are contacting consumers.

“I even get random calls and random SMSes of people saying that “we can assist you with your debt”, but nobody really knows that you have debt until you confirm when they call you. So it’s very important for consumers to just be aware that there’s a lot of scams that are going on and for you to be divulging that much information telephonically to somebody that you can actually don’t know and that you have not even checked if they are authorised to use these service providers or not, it is a bit concerning.”

The current high interest rates environment as well as rising inflation have put more pressure on consumers who are struggling to make ends meet. Consumers spend about 66% or more of their disposable income on debt repayments.

Annaline van der Poel, Chief Business Development Officer at Debt Rescue, says: “We know that from the last couple of months the interest rates increases and obviously the effect of inflation on the cost of leaving has placed millions of consumers in a position where they are struggling to meet both the sides of their budget and where debt review comes in.

“It’s a legal mechanism specifically created for consumers who are in this situation where they can’t pay their debts as well as meet their normal living expense obligations.”

The National Consumer Act does not make provision for consumers to get out of the debt review process before the process is complete and that even if your personal circumstances have changed you still need to complete the process and pay your creditors before you are able to exit.

Once you are under debt review you cannot take out new loans and it could take several years to complete the process but the process can also help you to be debt free.

Consumers are urged to assess their financial situation before they even think of approaching a debt counsellor and that in an instance where they have been misled into entering into the debt review process, they can lodge a complaint with the NCR.

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