Watchdog to set up debt review committee

Johannesburg - Backlogs in the debt review process are being caused by a complex set of factors, including severe capacity constraints in the judicial system, a National Credit Regulator (NCR) task team has found.

The NCR said on Tuesday the debt review task team - set up in October 2009 - has proposed the establishment of a committee to help unblock the debt review process.

The National Debt Review Committee would consist of representatives from credit providers, debt counsellors and payment distribution agents. Advocate Neville Melville, head of the task team, said this committee would effectively replace the task team.

"We are working furiously behind the scenes to implement it," Melville said.
 
The task team recommended that codes of conduct for the three stakeholders be developed and implemented as soon as possible.

It also recommended a set of enhanced debt review process guidelines addressing the process breakdowns.

It wants the Payments Association of South Africa and the relevant payments clearing houses to remove the nominal monetary limit of R5 000 on debit orders for payment distribution agents, to improve the recovery rates for payment arrangements under the debt review process.

It recommends 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.

"The thrust must be in the voluntary, non-statutory space, so the degree of cooperation between the stakeholders must improve. If all else fails, we will need to go back and look at statutory amendments," said Melville.

At the end of June 2010 over 180 000 consumers had applied for debt counselling, with an average of 7 500 new applicants each month.  

 - I-Net Bridge