While the National Credit Act (NCA) defines an Alternative Dispute Resolution (ADR) agent as “a person providing services to assist in the resolution of consumer credit disputes through conciliation, mediation or arbitration”, it does not limit the role of an agent to only resolving credit disputes. ADR (aka mediation) is a decision-making process, in which parties are assisted by a third person (the mediator) to reach a decision to which each of them can live with. ADR Agents also assist consumers in negotiating affordable repayment arrangements.
Debt review and ADR
Debt review is purely a mechanism to alleviate over-indebtedness. ADR is a dispute resolution mechanism, a decision-making process, and a mechanism to alleviate over-indebtedness.
A consumer might not be over-indebted but has a dispute with a credit provider on only one or two credit agreements, in which event, the debt review process is of no assistance to the consumer.
Some credit providers argue that arrears are not a dispute. Credit disputes are very different from normal disputes, as they always affect the consumer financially. It is, therefore, almost impossible to divorce a credit dispute from a payment arrangement as the outcome of most credit disputes leads to some form of debt restructuring or repayment arrangement.
In some cases, a consumer might need assistance to negotiate affordable repayment arrangements with credit providers, especially in instances where consumers feel threatened by the imbalance of power that is inherent in the creditor-consumer relationship.
ADR is a viable option for debt review. The two are not competing services if implemented in line with the National Credit Act. They are both aimed at fulfilling the purposes of the Act to relieve over-indebtedness and to provide for the consensual resolution of disputes. Consumers who do not wish to go under debt review or who do not qualify to be placed under debt review should be afforded the rights contained in the Act to resolve their credit problems voluntarily.
Benefits of ADR
ADR is a peaceful alternative to court. It promotes access to justice in that it facilitates an expeditious and cost-effective resolution of a dispute between parties. Both parties may come to an agreement in just a couple of hours, or it might take a few days to reach an agreement.
It preserves relationships between disputing parties (consumers and creditors), which may become strained by the adversarial nature of litigation.
Role of ADR Agents
ADR Agents deal with, inter alia, Section 129 (of the NCA) arrangements, voluntary repayment arrangements and some of the following common credit disputes:
- Reckless lending
- Collection of Prescribed Debt
- Disputes relating to credit or debit entries on accounts
- Abuse of the payroll process and illegal Garnishee Orders
- Refusal to provide statements
- Unfair credit bureau listings
- Illegal debt enforcement procedures
- Abuse of section 127 of the NCA (voluntary surrender procedures)
- Investigation and rescission of emolument attachment orders (garnishee orders)
- Rescission of administration orders
Challenges Facing ADR Agents
ADR in the credit industry is a new function that is still in its infancy stage. It still needs to be understood by some role-players in the credit industry. Currently, there are several credit providers who do refuse to engage in the ADR process in contravention of the NCA.
The National Credit Regulator has issued a circular requiring credit providers to cooperate with registered ADR Agents. However, the circular itself is ambiguous about the true role of ADR Agents and has not fully assisted with obtaining the cooperation of credit providers. ADR Agents continue to encounter resistance, and consumers continue to be disadvantaged by the obstructive policies of credit providers.
Licensing of ADR Agents
ADR Agents are registered and accredited by the National Credit Regulator. Currently, there are seven registered ADR Agents, six are based in Gauteng and one in the Eastern Cape.
* Lekala is the CEO of Repear Debt Restructuring and Welltec Academy, both subsidiaries of our Welltec Group
** The views expressed do not necessarily reflect the views of IOL or its sister titles