Debt counselling: 'Be wary'

The vehicle financing group urged consumers to make sure they were fully aware of the advantages and disadvantages of debt counselling.

"The debt counselling process is a serious matter and although it allows consumers, if they qualify, to repay their debt at reduced monthly instalments, it will take them much longer to pay off all their original debt,"WesBank said in a statement.

During the debt counselling process consumers would also be prevented from accessing any further credit.

"Consumers must, regardless of their financial institution, always approach their bank first should they be in any financial difficulty, or foresee any difficulty in the future, before seeking alternative solutions," said George Nyabadza, general manager marketing at WesBank.

"Over-committed consumers are especially vulnerable this time of the year and can easily fall prey to misleading advertising messages."

WesBank received complaints on a daily basis of consumers who had suffered a loss due to negligence and mismanagement of their affairs by debt counsellors.

"Another general complaint is where debt counsellors, after receiving their fees, do not always complete the debt review process, as their fees are paid up front and the consumer's problem is therefore not resolved," Nyabadza said.

He said a common mistake consumers under debt review often made was to entrust their debt counsellor with the duty of distributing their funds amongst their various creditors, instead of insisting that a payment distribution agent be appointed for the purpose.

"This has too often resulted in consumers losing money," Nyabadza said.

Where a consumer's only solution was to approach a debt counsellor, they needed to ensure the person was registered with the National Credit Regulator.

"In addition, registration as a member of the National Debt Mediation Association would be recommended, as the counsellor will be equipped to assist them with budget advice, support and mediation with financial institutions and other credit providers."

WesBank advised customers under debt review to keep up their monthly insurance premiums.

"In the event of a total right-off of the vehicle due to theft or an accident, the customer remains liable for the full outstanding debt on his or her finance agreement, adding further financial pressure if the vehicle is uninsured."

It was also important for consumers receiving a monthly car allowance to continue to use the full allowance towards paying off their vehicle instalment.

- Sapa