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Debt review: Why am I still suffering?

Sep 09 2011 07:27

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A Fin24 reader writes:

I have been under debt review for two years. I feel as if it is the worst decision I have ever made.

Firstly, I pay fees to the National Payment Distribution Agency (NPDA), so not much goes to the creditors.

Secondly, I pay a huge sum to a debt counsellor who doesn't do much work as I, the consumer, always have to be on top of everything.

Also, I have heard that when you cancel debt review, your creditors begin to sue you and you can't apply for a home loan or further credit as your credit report is messed up.

Why is this the case, when I am paying my creditors every month? Why hasn't the National Credit Regular Regulator (NCR) put down proper rules regarding debt review?

The reason I went into debt review was because I felt I couldn't handle my debt. I had a small amount - but now it seems that it has doubled.

Also, I have read that under the National Credit Act a consumer can apply for a consolidation loan while under debt review, but banks keep refusing me.

Ismail Kharwa, acting debt counselling manager at the NCR, responds:

We advise that consumers should first lodge complaints with the NCR so that we can investigate all the allegations. The remarks below are general as we do not have all the information from the parties involved.

  • The current NPDA fee is less than 3% of the amounts distributable to creditors. So, it cannot be that the amounts paid to creditors are minimal as the PDA amount is allocated in the proposal. If the PDA is overcharging the consumer, he/she can lodge a complaint with the NCR.
  • If the consumer did not receive service from the debt counsellor as expected, he/she should lodge a complaint with the NCR for further investigation. 
  • Once you voluntarily withdraw from debt review, the debt counsellor has to notify the NCR and we will forward a request to the credit bureaus to remove your name. This will take up to five working days after we received the request from the debt counsellor. 

It is important to remember that when you voluntarily withdraw from the process, your credit record will not be expunged and negative information will still reflect. It is only when you have fully paid up your accounts and the debt counsellor has issued you with a clearance certificate that your credit record will be expunged.

  • Your credit report will reflect negative information even if you are paying every month. It must be borne in mind that the amount the consumer is paying is less than the original instalment and will therefore reflect as a default.

The NCR established a task team in 2009 which investigated problems within the debt review system. This team was replaced on a permanent basis in 2010 by the debt review advisory committee. 

Through the task team's guidelines, a new workflow process and standardised outputs have been drawn to facilitate consensual arrangements between key stakeholders in the process.  

Stakeholders are bound by a code of conduct and acknowledge that it is necessary to implement a range of voluntary measures complementary to NCA provisions, to ensure that as many debt review cases as possible are brought to a successful conclusion.

The debt review advisory committee is monitoring the implementation of these processes. There is every indication that once the deployment of the standardised outputs and process flows are fully implemented, the hiccups that have been caused by conflicting court decisions and recent Supreme Court of Appeal judgments will to a certain extent be alleviated. 

  • After the consumer has applied to be placed under debt review, the interest will continue to accumulate until such a time that she/he gets a court order.

Once a court order has been granted or voluntary agreement has been reached, the interest rate will be adjusted.  

If the credit provider has not made the adjustment and the consumer has paid in terms of the repayment plan as proposed by the debt counsellor, the credit provider will be required to do a recon and account correction as and when the PDA notifies the debt counsellor that an account has been paid up. 

Should the credit provider not be willing to adhere to this, you can contact the credit ombudsman for resolution. 

  • Yes, under the National Credit Act a consumer can apply for a consolidation loan. However, credit providers can still refuse credit based on reasonable commercial grounds.

 - Fin24

 
national credit regulator  |  money  |  debt  |  debt review
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