National Credit Regulator: Debt counselling offers new lease of life for over-indebted consumers

Debt counselling offers new lease of life for over-indebted consumers

The National Credit Act introduced debt counselling in 2007 as a debt relief measure that could assist over-indebted consumers through providing budget advice, negotiating with credit providers for reduced payments and restructuring debt, thereby protecting the consumer from legal action by credit providers. Debt counselling is by no means a savings mechanism and consumers should beware of misleading advertising which markets debt counselling by promising consumers monthly savings of about 60%, cautions Anne-Carien Du Plooy, Acting Manager: Education & Communication at the National Credit Regulator (NCR).

Consumers contemplating debt counselling should first understand the terms and conditions. Debt counselling is not a free service, costs and fees are applicable. Not everyone can qualify for debt counselling. In order to qualify for debt counselling, consumers must have a disposable income to enable negotiation for the reduction of installments, says Du Plooy. “Only over-indebted consumers can qualify for debt counselling, if a consumer does not qualify, they will be rejected.” It is therefore, very important for consumers contemplating debt counselling to approach only registered debt counsellors who will advise them of all terms and conditions, costs and fees, as well as conduct proper financial assessments to determine if the consumer can qualify for debt counselling, adds Du Plooy.

Important considerations before contemplating debt counselling:

• Consumers married in community of property need to apply for debt counselling jointly. What this means is that when two people are married in community of property, one cannot simply undergo debt counselling independently. Only those married out of community of property can apply for, and undergo debt counselling independently;

• Consumers under debt administration cannot apply for debt counselling;

• Consumers cannot apply for, or be granted any new credit while they undergo debt counselling;