Shameless buyers exploit debt review

Johannesburg - Unscrupulous consumers have abused credit regulations by applying for debt counselling immediately after buying expensive items.

Neville Melville, who heads the National Credit Regulator's debt review task team, said on Tuesday that some consumers have exploited the very process designed to help them.

"Rather than paying their debt, people bought large screen TVs during the World Cup, or we have seen people buying an upmarket car and then immediately going into debt counselling," said Melville.

"The unscrupulous have exploited the openings - we saw it as important to have some intervention," he said at a briefing on Tuesday.
 
He noted that high debt levels were also a result of "things not working out in the general economy".

The task team recommends that a set of eligibility, affordability and reckless lending assessment guidelines for debt counsellors be issued by the debt review committee.
 
A set of debt restructuring rules is also recommended.

Plea for uniformity

At the moment there is no stipulation to guarantee payment plans, so the team recommended interim payments, with automatic debit order facilities.

The task team has proposed the establishment of a National Debt Review Committee to help unblock the debt review process under the National Credit Act, it said on Tuesday.

The team - set up in October 2009 - has found that backlogs in the debt review process are being caused by a complex set of factors, including severe capacity constraints in the judicial system.

Task team member Paul Slot, who belongs to a leading debt counselling group, also called for debt counsellors' software packages to comply with minimum standards to improve the way debt was restructured.

It is understood that at present different debt counsellors can come up with radically different repayment plans, which is not conducive to resolving the problem. The task team has called for more uniformity across all stakeholders to improve results.

 - I-Net Bridge