The National Debt Mediation Association (NDMA), an organisation set up by the credit industry to provide debt mediation services to consumers, is reinventing itself as an “independent, consumer services agency” that offers a wide range of services, including debt counselling, at a minimal cost or free for low-income earners.
The NDMA’s repositioning follows a bruising battle with the National Credit Regulator (NCR) late last year over conflicts of interest and exceeding its jurisdiction.
The NDMA was funded by the credit provider industry and monitored the industry’s compliance with a code of conduct to combat over-indebtedness, which, the NCR said, was overstepping its jurisdiction. To achieve independence, the NDMA is going to self-fund and obtain funding from donors, Magauta Mphahlele, chief executive of the NDMA, says.
Mphahlele says the NDMA will look to local donors, such as the Financial Services Board Consumer Education Foundation, and international donors, including the World Bank, which has funded educational projects by the NDMA. It will also seek to generate income from services offered on a “cost recovery basis”.
“We need to be sustainable, and so our plan is to cross-subsidise by charging those who can afford to pay for services so that we can provide a service to low-income earners.”
Mphahlele says the NDMA wants to offer “a one-stop-shop service” to over-indebted consumers. These services would include: individual or group financial hardship solutions; legal remedies; court mediation and consulting.
“Where a consumer requires and is suited to debt counselling, the NDMA will offer this service through a newly established unit within the NDMA, run by registered debt counsellors. These services will be charged according to prescribed guidelines where they exist,” Mphahlele says.
The debt counsellors will be salaried employees of the NDMA, which will “do away with the incentive to push people into debt counselling” [in order to earn fees], Mphahlele says.
It will also resolve the problem of referring consumers to service providers, the services of which the NDMA cannot vouch for.
“We have had to refer consumers out, and a lot of the time consumers weren’t happy with this and nor were we,” Mphahlele says.
The mediation service that the NDMA has provided up until now falls within the role of an alternative dispute resolution agent, which is provided for in the National Credit Act.
“A lot of the time, consumers are told to negotiate with their credit providers, but they don’t know how, so we help them to structure a reasonable proposal to put to their creditors. We also help consumers who have been terminated from debt counselling and whose creditors are taking legal action against them,” Mphahlele says.
The repositioning of the organisation is “a natural progression”, Mphahlele says, and the focus of the NDMA has always been on serving the consumer.
The NDMA is in the process of restructuring its board to remove members who represent the credit industry and replace them with independent members.
Having handled more than 40 000 calls over the past two years, the NDMA has built up a wealth of knowledge and experience in addressing consumer enquiries and empowering consumers with information and self-help tools on credit-related matters, budgeting, rights and responsibilities, and on how to handle disputes with credit providers, Mphahlele says.
The NDMA will continue to operate its helpline – 0861 11 6362 – and to educate consumers and inspire behaviour change through various media campaigns.
“We will be partnering with the award-winning NGO Heartlines on Nothing for Mahala, a movie about values and money, which will be launched on October 4 in cinemas around the country,” she says.
The film campaign is expected to reach 12 million people. The NDMA will also participate in training and consumer outreach events associated with the film.
InDebt, a reality show broadcast on SABC1, is another significant project, Mphahlele says. Season two of the series, which is by the producers of the popular etv soapie Scandal, opens in the second week of October. It is expected to reach more than six million consumers.
A key aim of the show is to empower consumers to resolve their over-indebtedness by completing tasks under the guidance of the “Debt Doctor”, Mphahlele says.
The story helps to educate viewers on how to take responsibility for their debt and where to go for help (see “TV show reveals how consumers in the red are put on road to recovery”, below).
CALL CENTRE PROVIDES ADVICE AND MEDIATION
The National Debt Mediation Association (NDMA) operates a national helpline for consumers with debt problems. In the second quarter of this year, the NDMA received 3 071 calls and made 5 168 calls, Magauta Mphahlele, chief executive of the NDMA, says.
The high number of outgoing calls can, in part, be attributed to the launch in February of an SMS call-back service for consumers who can’t afford to make long calls, Mphahlele says.
The SMS costs the consumer R1.50. On receipt of the message – which could simply read “Please call me” followed by your name – a member of the NDMA’s consumer services department will phone you.
Of the 3 071 calls received, most were from consumers seeking general information and enquiring about other stakeholders in the debt arena, such as the Credit Ombud or the Debt Counsellors’ Association of South Africa. The number of calls represented an increase of 16 percent on the previous quarter.
The next biggest category of calls comprised consumers who were experiencing financial hardship, and this was followed by consumers who wanted information about garnishee orders, specifically about the process that must be followed to contest these orders.
NDMA statistics for the second quarter of the year show a 38-percent increase in the number of cases referred to external parties, compared with the first quarter.
Most cases were referred to the office of the Credit Ombud (in respect of credit bureau and prescribed debt disputes), followed by the National Credit Regulator (in respect of debt counselling issues), credit providers and credit bureaus. “This shows the type of information consumers are seeking from the NDMA helpline,” Maphahlele says.
The NDMA’s mediation team provides services that fall into two work streams: disputes and financial hardship.
Disputes include debt-related problems involving auctions of a consumer’s property and car repossessions, as well as disputes about unsecured credit and debts that have been included in debt review and those that have been excluded from debt review.
Financial hardship cases refer to requests for help, including mediation on debts in arrears and finding solutions where a change in a consumer’s circumstances have resulted or may result in the inability to service debt.
Compared with the first quarter of this year, there was an increase of 15 percent in the number of new cases dealt with by the mediation team. Although most cases were resolved, there was a decrease of 20 percent in the number of cases that were resolved.
Mphahlele says it is time-consuming to resolve financial hardship cases, and there are instances when the NDMA cannot influence the factors that derail the process of finding a solution for the consumer. However, she says that understanding the reasons is insightful and ultimately helps the NDMA to serve consumers better.
She says it takes time to resolve cases of financial hardship, because consumers:
* Often cannot be contacted;
* Cannot afford to service all of their debts; and
* Often cannot offer repayment plans that will be sustainable and NDMA staff need to revise the consumer’s budget to offer the creditors a repayment proposal that is reasonable.
You can phone the NDMA’s helpline on 086 111 6362, or SMS the NDMA’s call-back line on 44238. SMSes cost R1.50.
TV SHOW REVEALS HOW CONSUMERS IN THE RED ARE PUT ON ROAD TO RECOVERY
If you’re struggling to manage your debt, don’t miss the next season of InDebt, the TV reality show that delves into the lives of over-indebted consumers and attempts to help them get on the road to financial recovery.
The SABC1 show is back by popular demand from October. Watch it on Tuesdays at 9pm.
InDebt is a collaboration between the National Debt Mediation Association (NDMA) and Ochre Media, the producers of etv soapie Scandal.
In an upcoming episode of InDebt, we meet Maria, a single mother of two boys, aged 16 and 12. Maria’s husband left her in 2010, but her financial problems began before that. Maria’s car started to play up and, because she had no savings, Maria had to use her credit card to pay for the repairs. Before long, Maria started to live off her credit cards.
To bring in extra income, Maria started a small business – a driving school. She bought a vehicle on credit and hired someone to run the business. But this turned out to be an ill-fated move: Maria soon found that she could not keep up with the repayments and had to sell the car on auction. The vehicle sold for R55 000 less than what Maria owed the bank. This only added to her indebtedness, which was so dire that she was paying reduced instalments on her own car.
Desperate for more relief, Maria was tempted into trading in her car for a new one from a dealership that offered the first two months “instalment-free”.
When the bank that financed the vehicle for her business started closing in on her, Maria went to see a debt counsellor. But although she was in debt review, the bank kept hounding her. It obtained a court order to attach her assets to recover the debt.
Maria is at risk of losing her car, and she can’t hold down her job without it. Maria’s total monthly income is R16 378. Her living expenses are R19 948, and her debt repayments are R10 518 a month. Every month, Maria faces a shortfall of R14 088.
Taking responsibility
The NDMA’s objective is to help Maria explore all the available options and to rehabilitate her in the process. To ensure that Maria takes responsibility for her actions, she has to carry out various tasks assigned to her by the “Debt Doctor”, Thoko Nchabeleng, an NDMA employee.
Nchabeleng tells Maria that she must find out:
* Her debt counselling status. Maria must establish if the court has consented to the payment proposal drawn up by her debt counsellor. If not, why? If so, why is one of her creditors taking legal action against her?
* If the vehicle asset financier can justify taking action against her. Is there a judgment? How much has she paid, and has she been paying what was agreed to with the debt counsellor. If Maria has been sticking to the payment terms, she might be able to get the judgment rescinded.
* If the payment distribution agency (PDA) has been disbursing payments to her creditors. Maria needs to check her statements from the PDA to see what she has paid to date.
* Does Maria have a case against the debt counsellor? If so, she needs to lodge a complaint with the National Credit Regulator. If she stands to lose her car, her home could be at risk, too.
* Does her credit report reflect that Maria is in debt counselling – because it should. If there is a garnishee order against her, this, too, should show on her report.
* Can Maria get mercy from the bank that gave her mortgage and vehicle finance, because she has more secured debt than unsecured debt? The bank might be willing to reduce her interest rate or extend her payment terms.
* Is her ex-husband paying maintenance? If not, Maria needs to claim maintenance from him.
* If she can apply for an exemption from paying school fees. This will provide her with instant relief of R600 a month.
* If she can find a tenant for an outside room to bring in much-needed income.
* If there is anything that she can sell, such as clothes or extra appliances, to free up cash?
The results
Maria does her homework and gets good news and bad.
The good news is that her former husband has agreed to pay maintenance of R1 000 a month and pay off the school fees. He has also offered to buy clothing for the children, so Maria is closing her clothing account. Maria has found a tenant for her outside room, which will bring in an extra R600 a month, and has reduced her grocery bill by R800 a month. She’ll use half of this to pay off the divorce attorneys each month and the other half to pay her children’s transport fees.
The bad news is that Maria’s debt counsellor has not presented a payment proposal to the court for consent, and it has been longer than 60 days since Maria applied to go under debt review. This explains why one of her creditors had taken judgment against her. When the NDMA intervened, the bank agreed to reverse the court action on condition that Maria stays in debt counselling and pays a minimum of R2 000 a month.
Maria’s debt counsellor commits to obtaining a court date soon, so that Maria will obtain the court order that she needs.
The outcome
Maria has managed to increase her monthly income and drastically reduce her living expenses, so that she will have a surplus of R1 700 every month.
Nchabeleng says that Maria’s case has been one of the most successful so far. “She has faced up to her debt and managed to keep her house and car. She’s on the right track.”
IN OVER THEIR HEAD
Magauta Mphahlele, chief executive of the National Debt Mediation Association, says Maria is fairly typical of most over-indebted people: middle-income earners who have been adversely affected by a change in their circumstances, such as divorce or retrenchment. They have a home loan, vehicle asset finance (VAF), credit cards, store cards and personal loans. They typically have a budget deficit of 30 percent. Maria’s deficit is much higher.
Maria’s debt balances:
Home loan: R304 859
VAF: R290 514
VAF shortfall: R53 540
Personal loan: R95 865
Personal loan: R6 298
Personal loan: R36 391
Credit card: R32 204
Credit card: R26 042
Clothing account: R1 432
Other: R7 000
Total owed: R854 145