A Fin24 user, who has been under debt review for almost four years, is still not touching the bulk of her debt. She writes:
I have been under debt review since 2009 and while I have paid off smaller accounts, the payments of the two cars under my name have not made a dent.
What will happen when I come off debt review? Will I lose my cars?
The one I drive is not so much an issue, I can bus it - it’s the car my divorced and struggling mom drives that is the problem. And if I lose my cars I still have to pay off the debt I have, I’ve heard.
I have also heard that my creditors were supposed to adjust my interest rate; one did, last year.
How do I go about having my interest rates adjusted as I am not even touching the bulk of my debt?
I would really appreciate any answer I get, as I am very worried and my debt counsellors are far from helpful.
Friedl Kreuser of Summit Financial Partners responds:
After three years under debt counselling, you should be seeing at least some reduction in all your debt.
One possible reason why this may not be the case is that, unfortunately, some credit providers do not update their systems with the reduced instalments or interest rates contained in the payment plan - even when they have consented to it.
This can cause complications:
1. If the credit provider does not reduce the instalment on their system, the reduced payments made by the consumer under debt counselling will be reflected as short payments, which can lead to additional default charges and even calls from debt collectors.
2. If the credit provider does not reduce the interest rate on their system, the reduced payments made by the consumer under debt counselling may be less than the original interest rate.
This means that the payments made will not reduce the actual outstanding capital, but merely service the interest (or worse, not even service the interest, causing the debt to increase).
How to address the problem will depend on how far your debt counselling application has progressed:
- If your debt counsellor has obtained a court order confirming the reduced instalments and interest rates, this must immediately be sent to your credit providers to implement on their system.
At this point, credit providers would be in contempt of the court order if they fail to update their systems.
- If you do not yet have a court order but your credit providers have consented to the proposal, your debt counsellor should ask your credit providers to update their systems.
Some credit providers claim they are unable to update their system until there is a court order, for complicated technical / legal reasons.
If this is the case, the debt counsellor should include a request in the court order for the credit providers to update their systems retrospectively from the date they consented to the proposal - in other words, to write off all amounts charged in excess of the payment proposal, from the date of consent.
- If your credit providers have not yet consented to the proposal, your debt counsellor should try to secure consent - or refer your application to court - as soon as possible.
If you feel that your debt counsellor is not performing his/her function adequately, you can ask the National Credit Regulator to intervene and ensure that the correct process is being followed by both the debt counsellor and your credit providers.
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
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