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THOSE who fear losing their houses and cars may have had an easier night after the banks declared a moratorium on Tuesday on seizing property from some clients who are receiving debt counseling.
But it may not be wise to throw away the sleeping aids just yet.
There are serious reservations about the new deal, which comes after a crackdown over the past three months on banking clients who have fallen behind on their mortgage instalments.
Banks have been attaching the property of many clients, even though they are under debt review and have a court date to approve new repayment terms.
The National Credit Regulator (NCR) announced that the four big banks have agreed to a “conditional moratorium” on terminating debt reviews and attaching property.
There are a number of conditions – including that you must have a mortgage and need to be under debt counselling already.
You also need to pay at least 80% of your monthly home loan instalment by the end of March. In addition, you need to pay 70% of your vehicle instament and 1.67% of the balance of all your other debt.
If you are a First National Bank client, you need to have paid at least 50% of your home loan instalment currently – which must be hiked to 80% by the end of March.
Debt counsellors and clients have until end-June 2011 to finalise debt repayment plans, before the moratorium is lifted.
This is just delaying the inevitable, says Robyn Hersch, an independent debt management consultant at the Gauteng-based Debt Comm.
There is a massive backlog at the courts and debt repayment agreements won’t be approved in time.
“Six months for over 170 000 cases doesn’t seem like enough time, if you consider that only 26 000 cases have been finalised by the courts in three years,” Hersch said.
While the NCR announced new debt counseling rules last week to ease the backlog, it is not expected to have a dramatic impact on the delays.
André Snyman, CEO of SA’s biggest debt counseling group, Consumer Assist, and vice president of the Debt Counsellors Association of SA, says his group has court dates for clients after the end of June and that these won’t be brought forward.
There are also concerns about the banks repayment demands, since only clients who can pay 80% of their home loan instalments will qualify.
“Many consumers under debt review will not be able to achieve this payment percentage. It seems like the bar has been set so high to ensure that the moratorium will actually not be of any benefit to many of those under debt review,” says Hersch.
“In order to get to that percentage, one would need to pay less towards other (unsecured) debts. This will no doubt anger other creditors, and then they may terminate the debt review.
“It’s a case of damned if you do, damned if you don’t.”
She says that the moratorium will assist those consumers who happen to have all lending products (including their home loan) with one credit provider. “Unfortunately, this is most often not the case.”
Snyman is also worried about the thousands of people who are already in the process of losing their properties, and hopes that these clients will be accommodated under the moratorium.
According to the NCR, the moratorium is applicable to all clients who were in debt counselling at the end of November.
- Fin24
