As debt counsellors, we speak every day to the segment of the population whom the National Credit Amendment Act - also known as the debt relief law - is targeting: those who earn less than R7 500 a month and who have debt of less than R50 000.
Our association has repeatedly approached the Department of Trade and Industry (dti) and the National Credit Regulator (NCR) to indicate that the rules laid out in the debt review process don’t work for the very poor, and we have asked for an engagement to define a special process in order to help. (And by “rules”, I don’t mean the debt review process itself.)
Two possible outcomes can play out in terms of the debt relief law:
1. Consumers can afford to pay a reduced payment if they fall into category 1 of people who can afford to repay. These consumers are most likely to dispute their payments within the first six months. For this reason, many debt counsellors set the bar on aiding people who earn R7 500.
The upcoming debt check movement in the banking industry, which is due to be in full effect by early next year, will change this.
The problem is that the NCR changed the Payment Distribution Agency (PDA) payout rules from 14 days to five days. Most disputes happen on day 10, and there has been plenty of engagement on this from the PDAs to the NCR and dti.
2. Consumers who earn less than R7 500 and have debt of less than R50 000. These consumers don’t have the disposable income to be able afford to repay their debts. Consumers who cannot afford to repay their debts virtually never do.
But with the technology used by the larger debt counselling firms, one could easily press a few more buttons and send our findings directly to the NCR or the National Consumer Tribunal for a final assessment, thereby saving taxpayers millions of rands.
We as an industry see this scenario play out every day as we are doing the work, and we are the ones in the front line of identifying these problems. Yet, as much as we are open for engagement and input about debt solutions, it seems our voices are lost in the wind.
The National Credit Amendment Act is sending the message to a nation that is already living beyond its means that it is acceptable to get into debt and not repay it, because the government will help to wipe it out. This is irresponsible and flies in the face of all the work being done to educate consumers on how to better manage finances and get out of debt.
Not to mention that South Africa’s fragile economy will be further endangered.
The National Credit Amendment Act should not simply be used as another piece of legislation used by politicians to score brownie points with voters.
We at National Debt Advisors have seen a marked increase in the number of consumers approaching us for solutions to their financial woes, and we are receiving more and more applications from
over-indebted consumers every day.
South Africans are enslaved by debt. The struggle is real. Consumers deserve solutions and options derived from the input of the debt counselling industry, which was put in place by the NCR in the first place.
Sébastien Anderson is the chief executive of National Debt Advisors.
PERSONAL FINANCE