Johannesburg – Banks have agreed to a moratorium on seizing the property of some of their clients who are under debt review.
This follows a crackdown on customers who have fallen behind on their payments in recent months.
Banks have toughened their stance on people who are receiving debt counselling. In the past, banks did not terminate credit agreements for cars and property if the client paid a set amount – as proposed by the debt counsellor’s repayment plan - and had a court date for a debt review hearing.
Tens of thousands of South Africans are still waiting for the courts to approve their repayment plans.
But recently the banks started terminating debt reviews with clients, even though they had paid up to 80% of their instalments, and had a court date.
Hundreds of indebted clients have lost their homes or vehicles as a result.
The National Credit Regulator (NCR) announced on Tuesday that the four big banks have agreed to a “conditional moratorium” on terminating debt reviews and attaching property.
“The aim of the moratorium is to as far as possible enable people who are in this backlog of unresolved debt counselling matters to retain their homes pending finalisation of their unresolved debt counselling applications through consent agreements or court orders,” the NCR said.
However, there are a number of conditions:
• You need to be under debt counselling already.
• You must have a mortgage.
• You need to pay at least 80% of your monthly mortgage instalment. If this is not the case at present, you have until March 31 to hike your monthly payment to 80%. You also need to pay 70% of your vehicle instament and 1.67% of the balance of all your other debt.
• If you reduce the amount you are currently paying on your home loan in the period up to end-March, you will be disqualified.
• If you are an FNB client, you need to pay at least 50% of your home loan instalment currently – which should be hiked to 80% by the end of March. FNB has been particularly tough on indebted clients.
• If your debt review has already been approved by a bank or by agreement with your creditors, or by court consent, you do not qualify.
Debt counsellors and clients have until end-June to finalise debt repayment plans, before the moratorium is lifted.
“Consumers (and their debt counsellors) are encouraged to contact their mortgage bank immediately to establish whether they can qualify, and what the conditions of the moratorium are to enable them to suspend any termination and enforcement action that may already be under way which could cost them their homes,” the NCR says.
But André Snyman, CEO of SA’s biggest debt counselling group Consumer Assist and vice-president of the Debt Counsellors Association of SA, is concerned about the thousands of people who are already in the process of losing their properties.
In the past three months, banks have been aggressively terminating agreements with many of their clients and started to attach their property.
Will the banks also give those clients a chance, asks Snyman.
The moratorium is applicable to all clients who were in debt counselling at the end of November.
Debt counsellors would also need to restructure clients’ repayment plans in order to lower other credit payments so that mortgage repayments can be hiked to 80%.
Snyman worries that changes to repayment plans would disqualify clients.
The NCR has also approached the High Court for clarity on when banks are allowed to terminate the debt review and attached assets, while applications for debt reviews are on the court roll.
Last week, a new set of rules was introduced to revamp the embattled debt counselling process.
More than 200 000 consumers have applied for debt counselling, but only 26 000 cases have been resolved by the courts.