Debt review offers South African consumers, who receive a stable income, a sustainable, legal, get-out-of-debt solution, says Carla Oberholzer, a debt adviser and public relations officer at DebtSafe.
Debt review, which is also referred to as debt counselling or no-loan debt consolidation, is in line with the legislation of the National Credit Act (NCA).
The process offers to make the lives of consumers affordable, allowing them to take care of their living expenses and go on with life while paying off their debt.
How does the process work?
The debt review process starts with a consumer approving the process and completing the application form (Form 16). The process then goes through administrative procedures that are handled by a registered debt counsellor. The National Credit Regulator (NCR) will then issue a clearance certificate to complete the process.
The debt review process may be unknown to many consumers, resulting in various misconceptions about the process.
Oberholzer debunks common myths consumers tend to believe about a debt counsellor and the debt review process:
All debt counsellors operate the same
According to Oberholzer, how registered debt counsellors operate should not be generalised because every debt counsellor has their own set of procedures, values, and outlook when assisting individuals.
“When selecting a debt counsellor, a consumer needs to pick someone who speaks to their core values and with whom they can relate as an individual.“
No one can learn from the debt review process
Oberholzer said there was a lot for consumers to learn during the debt review process, including how to manage future finances.
“The journey of the debt review process establishes a behavioural change regarding a consumer's finances. The effect of debt review can be pretty drastic, but what the consumers gain or what they will achieve financially is priceless.”
Debt counsellors just want to make money
“The NCR confirms and regulates debt review fees, and debt counsellors cannot simply ask what they want. Plus, an appointed and registered Payment Distribution Agency works with a client’s finances towards creditors and not the debt counsellor,” Oberholzer said.
One cannot get credit after debt review
Oberholzer said credit applications could not be denied because of someone’s debt review history.
"Once a consumer has been issued a clearance certificate, they can slowly but surely rebuild their credit score again to apply for a home loan, vehicle finance, and other credit-related applications,“ Oberholzer said.
“The aim is to get clients credit active again but responsibly. Numerous clients who went through the debt review process successfully applied for credit again. If a credit provider denies credit access, a consumer has the right to receive an explanation as to why the credit has been declined.“
Debt review can't help protect someone’s house or car
Through provisions detailed in the NCA, debt review offers protection against repossession of one's assets. The process allows clients to repay their debt, including home loans and vehicle finance, without losing their assets.
She said that once an individual entered the debt review process, all credit providers were barred from taking further action against them, on account of the debts being included in the debt review programme.
“The only way credit providers are allowed to repossess an asset is if a consumer has signed a letter in which they voluntarily surrender the asset or if a legitimate court order of the high court has been presented.”
Easy come, easy go
Managing severe debt is not easy but with the assistance of a registered debt counsellor, clients are given room to breathe during the recommended debt review process.
“At the same time, various procedures and negotiations are implemented on their behalf. The structured, legal process enables consumers to pay off their debt in one affordable and reworked monthly payment. Therefore, clients should be committed to biting the short-term bullet to be debt-free in the long run,” Oberholzer said.
“Managing debt is not the easiest or fastest of processes to take on. But if and when consumers find themselves in a stressful and unavoidable over-indebted position, registered debt counsellors are there to assist and point them in the right direction to – in the end – regain financial freedom.”
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