Adra: Not all debt collectors are crooks

Aug 21 2012 14:56
Fadia Salie

Cape Town - The Association of Debt Recovery Agents (Adra) has strongly defended debt collectors and attorneys, stating that they perform debt collection in a dignified, professional and lawful manner.

The voluntary association of debt collection businesses was responding to an article Fin24 published on August 6 2012.

In a letter to Fin24, Adra said it believes the "entire article – “R3bn stolen from employees – expert” – is a very gross generalisation of the debt collection industry and is not nearly a true reflection of the way in which debt collectors conduct themselves".

The claim by Summit Financial Wellbeing's Clark Gardner that "the collectors are becoming more aggressive and less concerned about recourse as there are few entities challenging their unscrupulous behaviour", is simply not true and is an insult to the character of the vast majority of industry participants, the body said.

“The debt collection industry is a multi-billion rand industry with several hundred million accounts being collected on by debt collectors and attorneys annually, the majority of which have very large and sophisticated call centres, which allow them to approach indebted consumers via a telephone call or sms first before any other action is taken.

"Some never even resort to legal action.

"The legal process is an expensive process, and as such the majority of the approximately R1bn collected per month in South Africa is done through call centres."

Adra said it does not deny that there are unscrupulous debt collectors and attorneys who do not comply with the law, but their records show that these are the minority of the industry.

The association said that most instances of unlawful practice occur with companies which are not registered with the Council for Debt Collectors or the Law Society.

The members of Adra, which was founded in 1988 to help debt collection businesses render a professional service to their clients and to establish ethical standards for the debt collection industry, include sole proprietors, partnerships and businesses employing no more than five people to organisations which have more than 500 employees.

Adra said it was instrumental in the promulgation of the Debt Collectors Act, 114 of 1998 in 2003.

The association represents more than 70% of the debt collection industry, and is recognised by the department of justice and constitutional development and the Council for Debt Collectors as the only industry representative.

Adra said that the body - along with the Council for Debt Collectors - continuously and tirelessly works to rid the industry of unscrupulous debt collectors. Some of the companies mentioned in the Fin24 article are in fact already being investigated, it said.

Adra also hit back at Gardner's statement that at least R3bn is being stolen from employees through garnishee deductions, saying it believes this is a "gross exaggeration, not only because of the fact that statistical records paint a different picture, but also because Gardner's statement conflicts with his own website which states that an average of R500 is being over-deducted per order.

"The fact is that numerous employers do not have proper systems in place and do not cease making deductions from employees' salaries once a debt has been paid in full - notwithstanding the relevant debt collector or law firm's repeated communications instructing them to cease making deductions.

"Such over-deductions create an administrative nightmare for the industry and is not the fault of the industry," the letter stated.

According to Adra, Gardner's statement that "the system is weak in that it protects the collector, and any recourse from the consumer requires court action, which the ordinary consumer does not understand and cannot afford", is incorrect.

“Each debt collector in this country must be registered with the Council for Debt Collectors, and practising attorneys must be members of the appropriate law society.

"Each and every aggrieved consumer is free to refer their grievances to either the Council for Debt Collectors or the Law Society of South Africa.

"Both these entities are skilled, capable and mandated to handle any complaints from consumers.

"Portraying the debt collection industry in general as malicious is counter-productive.

"It motivates distressed consumers to avoid their creditors and/or entities appointed to recover such arrear accounts, resulting in an unnecessary escalation in interest accruing to the account as well as costs being incurred in enforcing the creditor's rights.

"In the process consumers incur a negative credit record, effectively cutting off their access to credit. Ultimately the consumer bears the brunt."

Adra said it, just like Gardner, has a passion for the well-being of consumers and for their ultimate rehabilitation.

Meanwhile, Summit said it has certainly seen an increase in the number of legal breaches among its clients and the collectors collecting debt from them.

"Our website may well be outdated. It is difficult to estimate an average. Sometimes we save an employee R100; sometimes we save her R100 000. Our biggest saving to date was R347 000.

"During the past month or so we had two savings of over R100 000. We will gladly share this information with Adra.

"At the moment our company saves employees in total between R300 000 and R400 000 per month, and we receive about 400 new orders per month. So (our claim of) R1 000 per order may well be about right... and it is (only) an average," Summit hit back.

Summit welcomed Adra's plans to educate consumers, saying that it would "gladly meet with Adra to play a part" in the education drive.

Adra said that along with other news websites, magazines, radio stations and television programmes, it is on a focused drive to educate consumers about their debt collection rights.

 - Fin24

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