Johannesburg - Indebted consumers pay back R320m each month, but creditors still harass them, debt counselling company Consumer Assist said on Monday.
"Debt counselling sees more than R320m a month get paid back to creditors and 91% of creditors - a rise of 6% - say more consumers are making arrangements to repay debt," Andre Snyman, CEO of Consumer Assist, said in a statement.
"Debt repayments have leapt almost 20 times in two years - in June 2008, they were a mere R11m, according to the National Credit Regulator."
He said consumers were showing significantly more responsibility when it came to paying back debt but still many creditors had adopted an aggressive stance toward those trying to restructure debt.
This included persistent phone calls often late at night, threatening letters and even visits to consumers under debt review.
These actions were illegal in terms of the National Credit Act, but served to intimidate consumers.
"Every R1 a consumer pays back of debt represents a saving of at least R2 to creditors instead of pursuing debt using lawyers, debt
collectors and the courts."
The Consumer Financial Vulnerability Index (CFVI) carried out by the Finmark Trust and the University of Pretoria's Bureau of Market
Research showed that those creditors that believed more consumers were arranging to repay debt had jumped to 91% from 85%.
"Three of the four main components of the CFVI improved in the first quarter of this year - savings, debt servicing and income,"
Snyman said.
But although billions of debt was repaid last year through debt counselling, the war between creditors and consumers continued.
"The National Credit Regulator said at the end of March that monthly payments to creditors by people under debt counselling
exceeded R160m through payment distribution agencies," Snyman said.
79% of consumers happy with outcome of debt counsellingThis represented around half of all debt and the total being paid back each month was closer to R320m.
A task team at the National Credit Regulator (NCR) said obstacles to greater debt counselling success were often caused by weaknesses in the policies and procedures at creditors for dealing with debt counsellors.
Credit providers refusing to accept debt counselling had also caused two year court delays for debt counselling cases, Snyman said.
NCR ombudsman Gabriel Davel said the task team had found that debt counselling had assisted consumers to deal with the negative
impact of the financial crisis.
Davel said debt counselling might also have helped to curtail repossessions and prevent a decline in the housing market.
Snyman said a recent survey found that more than 79% of consumers were happy with the outcome of debt counselling.
The NCR task team proposed that credit providers improve policies and procedures including greater co-operation between different business units in restructuring debt and improved administration to ensure that credit providers did not delay cases.
Snyman quoted a recent issue of attorney's journal De Rebus as saying: "It is the job of the debt counsellor to render a specialised forensic service to the consumer."
The work debt counsellors did was often underestimated, it had to stand the rigours of a judicial process and be acceptable to the top legal minds employed by major creditors at banks and retail outlets.
"We use specialised software developed in South Africa to ensure that administration exceeds best practice."
- Sapa