QUARTERLY NEWSLETTER July – September 2012
CONTENTS A WORD FROM THE CEO 05 THE NDMA AND THE DEBT COUNSELLING INDUSTRY 06 UNIVERSITY OF PRETORIA DEBT COUNSELLING ASSESSMENT REPORT 08 REVIEW OF CODES OF CONDUCT 08 NCR AND NCT ANNUAL REPORTS 09 NCA AMENDMENTS 10 JOINT STAKEHOLDER DEBT REVIEW FORUM 12 NDMA OPERATIONAL FEEDBACK 13 ALLEVIATING OVER-INDEBTEDNESS 15 CENTRAL DATA SWITCH (CDS) 18 COMPLAINTS AND ENQUIRIES 20 COMMUNICATIONS AND CONSUMER/STAKEHOLDER OUTREACH 23 EVENTS/CONFERENCES/WORKSHOPS 24 CASE STUDIES 27
A WORD FROM THE CEO The last quarter has been a rollercoaster ride for the National Debt Mediation Association (NDMA). While many might view the events surrounding the Voluntary Debt Mediation Solution (VDMS) Pilot as negative, we view them as a watershed moment where many important industry issues that have been boiling below the surface were brought to the fore. The events have led to many debates about what the real intention of section 48(1) (b) is and the role of the NDMA in that regard, the status of the Task Team Recommendations and related Codes of Conduct as well as the role of the Regulator in applying the law taking into consideration the Constitution, fair administration of justice and the National Credit Act (NCA) itself. These debates are important in the context of imminent amendments to the NCA, the ever increasing debt stress levels, and compelling evidence that the debt review process is faced with many challenges that limit its ability to rehabilitate a sufficient number of debt stressed consumers. This has been confirmed by the University of Pretoria’s Debt Counselling Assessment Report. Instead of tackling the issue head on, many of us went on the defensive and in the process opportunities to engage in proper debates were lost. The NDMA hopes that once the dust has settled we will all reconsider our stance and move on in the interest of the consumer and millions of South African households. The whole industry needs to be mature enough to accept that there are problems and instead of playing the blame game there needs to be greater collective efforts to resolve the issues raised. It is unfortunate that the VDMS Pilot was stopped as the industry lost an opportunity to test and learn from a possible solution that could later be adopted by the whole debt counselling industry. Putting the legal issues raised aside, there seems to be some other underlying concerns that have not been properly expressed and it would be beneficial if these could also be surfaced and properly debated. The NDMA has also been forced to do serious self-introspection about its current and future direction and impact. The big question is the dual role that we play in supporting the statutory process within a self-regulatory mechanism in the form of the Industry Code of Conduct. This is probably a first in the world and comes with its own challenges. The duality of roles is bound to create confusion regarding the roles and responsibilities of the NDMA vs the National Credit Regulator (NCR). It also brings to the fore the question of whether the statutory process needs to be supported or complied with and properly enforced. The NDMA is of the view that a collaborative approach across the industry operating under the guidance of the NCR is the only way to go. Even if the law is amended there would still be a need for industry to deal with the practical implementation requirements, and sight of this should not be lost.
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THE NDMA AND THE DEBT COUNSELLING INDUSTRY The VDMS Pilot was interpreted by some debt counsellors as an indication that the NDMA does not support the statutory process. The bulk of our day to day work is spent on supporting the statutory process, from resolving debt counselling disputes, getting credit provider buyin, addressing non-compliance, managing the Debt Counselling Rules System (DCRS) and developing other technology solutions like the Central Data Switch (CDS). The NDMA does, at the same time, have a broader mandate relating to combating over-indebtedness. This entails identifying blockages in and outside of the NCA and proposing solutions. The fissures in the debt counselling industry have also come to the fore and indications are that it will take time before this industry speaks with one voice. There seems to be two points of view where some support the Task Team(TT) agreements and others seem to prefer a pure statutory process without the support of voluntary agreements. The call for the review of the Codes will open the Task Team agreement to further debate and input and this has created a lot of uncertainty in the market as the NDMA and other role players were beginning to make substantial progress in implementing the TT Recommendations. Challenges remain and there should be greater focus on dealing with them by all parties including the NDMA.
Raising challenges is seen as an attack on the industry but this is not the case.
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What has been lost in the debate around the VDMS Pilot is the need to professionalise the debt counselling industry as many of the problems identified in the system include the low entry requirements as well as the capacity of some debt counsellors to manage a highly complex and demanding process. Raising challenges is seen as an attack on the industry but this is not the case, the intention is to ensure that the industry maintains a good reputation and has the capacity to assist consumers effectively and efficiently. The interdependencies in the debt review process require cooperation and positive engagement between debt counsellors (DC) and credit providers (CP). This does not mean debt counsellors should overlook untoward credit provider behaviour; they should identify it, challenge it and get it resolved. Credit providers also have some work to do in improving their compliance levels both with the statutory and voluntary agreements in place.
Statistics from the Credit Ombudsman indicate that since January 2012 the Ombud dealt with 198 cases and in more than 45% of the debt counselling complaints they dealt with, the debt counsellor had failed to complete the process, had absconded, or had engaged in some or other form of unprofessional conduct. The Credit provider was at fault in 8% of cases, and the consumer in 14% of cases. The graph above indicates areas where the DC and CP had failed. For debt counselling to build a good reputation, the various DC associations need to take these issues seriously and find ways to build the capacity of debt counsellors to provide an optimal service to consumers. The NDMA would like to see a functional DC process while also at the same time increasing the options available to consumers. Non adherence to court orders, slow responses, non-provision of certificates of balance and invalid terminations were prevalent amongst credit providers. The major problem in this instance is claims and counter claims of information having been sent and not received. The fact that documents are sent through email and faxes and there is no trace and track system is problematic. The Central Data Switch would solve this problem and in that regard the NDMA is continuing with the development of the CDS. The NDMA is also beefing up its compliance division and progress has been made in creating a compliance framework and structure. All the policy and procedure documents that would enable the NDMA to start enforcing the Code have been consulted with all industry associations, including DCASA, and have been finalised. These include: a) The debt review process rules that outline in detail the responsibilities of all the parties in the debt review process. It took a year to negotiate this document and as such it is a solid document that can be used as a guide across industry; b} The disciplinary code and procedures to inform the industry how the NDMA will address repeated non-compliance and what structures will make these decisions; c) Terms of reference of a disciplinary committee that will be chaired by an independent chairperson. The Disciplinary Committee has been set up and all the rules and procedures to be followed have been finalised. The Committee had its first meeting in August 2012.
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UNIVERSITY OF PRETORIA DEBT COUNSELLING ASSESSMENT REPORT The good news was that the University of Pretoria confirmed that the NCR Task Team recommendations, as implemented by the credit industry through the NDMA, DCASA and PDASA have made a positive impact to the debt review process. Concerns remained around various court judgments especially those relating to section 86(10) and section 129. The reports praised the work of the NDMA Joint Debt Review Forum, which has developed many agreements relating to improvements to the process. Our next challenge is how we acquire broader industry buy-in to implement these agreements. A positive outcome of these processes is that this work can be taken into consideration when NCA policy and legislative amendments are developed. Of more relevance to recent events are the report’s concerns about the exclusion of certain consumers from the debt review process and the reliance on informal agreements between members of the industry. VDMS was a possible solution and in its absence there is clearly an urgent need to explore and engage on developing other solutions. Blockages in the Courts are one area where the report indicated that there are still concerns. According to the report 39,306 court orders have been issued and 38,800 are in process. The report indicates that 66,882 consumers are paying through PDAs with about between 4,000 and 5,000 paying directly. With only 39,306 confirmed court orders and 66,882 consumers paying through Payment Distribution Agents (PDA)’s, there is a substantial amount of consent orders that have not been confirmed by the courts but which both credit providers and consumers are honouring. Since 2007 the National Consumer Tribunal (NCT) has dealt with 1819 consent orders and up to the year ending December 2011 had completed 1,141 of the applications. In its 2011 Annual Report the Tribunal indicated that it had to provide a lot of assistance to debt counsellors to help them complete their filings according to the Tribunal rules. There is clearly an underutilisation of the Tribunal and there
needs to be an understanding of whether this is due to the NCA’s differentiation between temporary payment difficulties and overindebtedness or whether there are other reasons. The report made the following recommendations: a) Legislative and regulatory reform of the NCA; b) NCR needs to increase capacity and incentives to retain experienced personnel; c) NCR presence in the NDMA joint Forum should be encouraged; d) A comprehensive research project in conjunction with the Department of Justice, the dti, and other financial regulatory bodies needs to be undertaken regarding further and alternative debt relief measures to specifically cater for consumers legally or factually excluded from debt counselling, administration and insolvency; e) Compulsory fidelity fund certificates, independent audits and comprehensive insurance cover should be implemented for practicing debt counsellors and PDAs; f ) A process should be created to minimise mistakes in the termination process and there should be some judicial oversight; g) Competency skills of debt counsellors should be improved and ongoing professional development should be compulsory; h) There should be training for magistrates; i) There should be section 103(5) audits of credit provider systems; j) The National Loans Register should be implemented; and k) ADRs should be regulated.
REVIEW OF CODES OF CONDUCT The call to review the various Codes came as a surprise as the NDMA was not officially informed of the review and its reasons. The Codes and the TT recommendations are less than two years old and many credit providers have recently subscribed and are as such only beginning to understand the Code and operationalise it. As of September 2012, 2,694 out of 3,972 nett registered credit providers have subscribed to the Code. With regards to debt counsellors 1,084 out of 1,822 nett registered have subscribed to the Debt Counsellors Code. As a body responsible for implementing the Credit Industry Code and the TT recommendations, the NDMA has a material interest in the process and outcomes of the review process and will engage with the Regulator in this regard. In the process of reviewing the Codes, care should be taken not to reverse the positive gains made. The process should also be transparent and more inclusive, by seeking comment from other stakeholders independent of the registrants themselves. 8
NCR AND NCT ANNUAL REPORTS September is reporting time for most public entities where they have to submit their 2011/2012 Annual Reports to Parliament. The NCR and NCT Annual Reports have been tabled. They reveal some interesting facts regarding credit in general and debt review. The following are interesting facts from the reports:
NATIONAL CONSUMER TRIBUNAL (NCT) The NCT dealt with 1936 consent order applications of which 935 were finalised. A majority of the orders were debt restructuring orders. The Tribunal highlighted the following: a) It interrogates the orders and does not just give a stamp of approval; b) It only considers consent orders where the consumer is experiencing difficulty in satisfying their obligations in a timely manner and refers those where there is a finding of over-indebtedness to the courts; c) Where it suspects reckless lending, overcharging or any prohibited conduct it rejects the consent order and refers it back to the NCR for investigation; d) Many of the referrals to the NCR were due to the NCT having raised the issue without it being raised by the debt counsellor.
NATIONAL CREDIT REGULATOR (NCR) With regards to Debt Counselling the NCR reported the following: a) 309,000 debt counselling applications since 2007; b) 189,143 consumers active under debt counselling; c) 41,180 court orders granted and 38,001 on the court roll; d) 1,010 clearance certificates issued; e) 102,229 consumers registered with PDAs with 71% making payments; f ) R2.8 billion distributed to creditors for the year ending December 2011 The NCR also reported that it completed 106 investigations, received 1,740 complaints of which 1,042 were debt counselling complaints. With regards to the University of Pretoria report the NCR highlighted the following: a) I ndustry guidelines impacted positively on the debt review industry with notable improvements in consensual debt resolution; b) C ompliance with timelines to the provision of information and responses to proposals have increased although problems are still experienced with some credit providers; c) T here are still problems experienced in the Magistrates courts such a long waiting periods, lack of consistency between courts, incomplete court applications; untrained debt counsellors; magistrates and attorneys etc; d) I nterpretation of NCA by the courts on sections 129, 86(2); 86(11) and 103(5), has to a very large extent brought an end to the uncertainty created by previous, often conflicting judgments.
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NCA AMENDMENTS The Department of Trade & Industry is in the process of conducting a policy review of the NCA. The NDMA supports this approach as it means a holistic review of the underlying policy imperatives that informed the legislation will be scrutinised for impact and any unintended consequences. South Africa and the industry dynamics are completely different from the time that the NCA was conceptualised in 1999. The data published the “Policy Framework for Credit “in 2004. At that time the credit industry was worth R362 billion and South Africa was 10 years into democracy. The emphasis was therefore on addressing historical imbalances in the form of doing away with discriminatory market practices, creating access to credit, reducing the cost of credit and creating institutional capacity for better enforcement and dispute resolution. The industry is today worth R1.3 trillion and there are now different concerns and issues to address. The number of credit active consumers has increased from 15 to 19 million and over-indebtedness remains a sticky point. Chapter six of the policy document was dedicated to proposals on how to deal with over-indebtedness. The chapter highlighted the following: a) Over-indebtedness results from reckless lending and borrowing b) Over-indebtedness depletes household income and expenditure. The following were measures proposed to prevent and deal with over-indebtedness: a) General requirements for credit providers to conduct affordability assessments would be introduced b) Stiff penalties for reckless lending, including the suspension of reckless credit agreements c) Establishment of the National Credit Register d) Introduction of debt counselling as an alternative to debt administration e) A network of regulated debt counsellors would be created with minimum entry requirements so as not to create barriers of entry f ) F unding is made available to provide debt counselling on a large scale. A significant government role was envisaged in providing this funding
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g) Insolvency Laws to be reviewed h) In duplum rule to be codified i)
onitoring levels of over-indebtedness through the NCR followed by the review of protective measures from time to M time.
The question to be asked is whether these policy intentions were achieved. The NDMA has amassed a body of knowledge through the cases it has dealt with that could inform the policy review. One thing that is very clear is that the debt counselling provisions of the Act need a serious relook but this should not be done in isolation to the other remedies, being administration and insolvency. Over-indebtedness is not only a result of reckless lending and borrowing. It is also a result of a complex combination of factors including economic cycles, personal money management, life events and financial literacy levels. Chapter seven of the document addressed the role of Industry in complaints resolution and redress schemes. This chapter highlighted the following: a) Responsible complaints handling through interaction between the credit provider and the client is likely to provide the most efficient remedy for consumers; b) It would be the most cost effective mechanism to address consumer problems and avoid government intervention in the relationship between credit providers and millions of clients; c) R esponsible complaints resolution mechanisms that are managed by industry members would allow government, national and provincial regulatory bodies to limit their involvement in those cases that are not solved through ADR, to serious cases and to cases of systemic breach of legislative provisions; d) I ndustry based self-regulatory mechanisms have an important role to play and any industry based mechanism would be welcomed provided they operate on the basis of approved Codes of Conduct; e) P rovision would be made for the expansion and support of Non-Governmental Organisations to provide consumer education, debt counselling and general advise. This chapter speaks to the role of the Ombudsman and organisations like the NDMA in coordinating industry initiatives and providing a dispute resolution service. It is clear from a policy perspective that self-regulation has a role to play.
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JOINT STAKEHOLDER DEBT REVIEW FORUM All the debt review stakeholders (Credit Providers, Debt Counsellors and PDA’s) are still actively participating in the monthly Debt Review Stakeholders Forum (DRSF) meeting chaired and hosted by the NDMA. PDASA nominated a new representative member and since April 2012, Chris van der Straaten has already produced three discussion papers for the forum. Since August we had to say goodbye to Andre Snyman and Wikus Olivier as DCASA representatives – and thank them for their contributions, but would like to welcome Mauritz van den Heever and Russell Dickerson who are well known in the debt review industry – we look forward to working with you. In the DRSF meetings, new trends and developments are communicated and guidelines for the debt review process are discussed. Once common agreement is confirmed, these agreed guidelines are then referred to the Debt Review Advisory Committee (DRAC) where approval is sought before submission to the NCR for final approval. The forum members raise new issues from time to time and these are then noted and addressed in due course. Several guidelines have been approved, whilst other issues identified are still being discussed. Agreements have been reached on guidelines for: a) Incomplete court applications; b) Withdrawal and transfer of consumers in debt review; c) Affordability and eligibility; d) From court order to clearance certificate; e) Debt Review Process Guidelines. These guidelines are available from the NDMA Website>Documents>NDMA Debt Review Stakeholders Forum. Although some principle agreement has been reached on the Joint Bonds document, the sub-committee group is still considering technical issues (for example court procedure requirements) and we look forward to some common agreement soon. Interpretation of S.103 (5) (In Duplum) has been discussed in the DRSF meetings, but it remains a subject of contention because of intricate complexities. A common approach by the courts to date did not bring about certainty nor clear understanding of all possibilities; especially where secured debts are considered to be at stake. Where debtors accounts (“debtors book”) are sold by one credit provider to another credit provider or third party collector, challenges are created (returned payments, amended interest rates, bureau reporting, different account numbers, consumer knowledge of the transfer and notices, account referencing, etc.), - this is another discussion paper being developed for further consideration. To make easier acceptance of proposals possible, credit providers are formulating requirements of a “checklist” to enable debt counsellors to use a “tick box” check process. A big THANK YOU is extended to all members of the DRSF and particularly those members who participate in the sub-committee work groups on behalf of and for the benefit of other members and the entire industry. 12
NDMA OPERATIONAL FEEDBACK While the VDMS Pilot debate was raging the NDMA continued with its normal work in terms of mediating complaints, maintaining a platform for industry engagement and collaboration, building the capacity of its compliance division and educating consumers. APPOINTMENT OF INDEPENDENT CHAIRPERSON The NDMA is pleased to announce the appointment of Sikkie Kajee as the new independent Chairperson of the NDMA Board. Sikkie is an independent consultant who boasts an illustrious career in the field of finance and corporate governance spanning almost 30 years. Sikkie served his articles with BDO Spencer Steward in Durban, where he spent seven years before joining the internal audit profession at two parastatals, namely, Agricor and Agribank in the North West province. He spent four years in Mafikeng before returning to Durban to head the Transnet Group Audit Services in KwaZulu-Natal. During his tenure at Transnet, Sikkie also worked as a risk manager responsible for a department with a budget of R20 million, 200 permanent staff, and 200 contractors. Sikkie was lured back to the consulting profession to establish Ernst and Young’s Business Risk Consulting (Internal Audit) division in the Western Cape, prior to joining Gobodo Inc. Sikkie established Gobodo’s Risk Management Division and was responsible for growing it from 3 staff members and R1 million in fees to 42 staff and R18 million in billings over a period of 5 years. He left Gobodo to join KPMG in order to meet new challenges. Sikkie spent eight and a half years as a partner at KPMG firstly in the internal audit services unit and for the last three years, in the management consulting unit. He left KPMG at the end of August 2012, to become an independent consultant in the corporate governance and finance field. Sikkie serves on the following Boards in addition to his duties at the NDMA: a) Institute of Directors, where he is Chairperson of the Audit Committee b) South African Ballet Theatre, where he is Chairperson of the Finance Committee c) Chartered Secretaries Southern Africa d) Business and Arts South Africa, where he recently stepped down as Chairperson. Academically, he holds an MBA (UKZN) and Hons BCompt (Unisa).His wealth of knowledge in the corporate governance field will assist the NDMA to review and revamp its corporate governance structures, policies and procedures. The NDMA Board, Management and Staff welcome Sikkie to the organisation and wish him a fruitful and fulfilling stay with the NDMA. 13
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Never spend your money before you have it.” Thomas Jefferson
”
ALLEVIATING OVER-INDEBTEDNESS The DCRS is a central platform used by debt counsellors, through their system providers to develop restructuring proposals that carry automatic consent by Code subscribing credit providers. The use of the DCRS cuts down on circular negotiations, guarantees a high solve and acceptance rate and reduces matters that go to court on a contested basis. Currently the DCRS interfaces with the 5 biggest DC System Vendors. These System Vendors service 95% of the active registered debt counsellors.
276k
DCRS APPLICATIONS QUARTER ON QUARTER The graph below represents the number of debt review applications that have been submitted through DCRS since the start of Q2 2011. It shows a portfolio of debt at consumer level (i.e. does not count individual accounts per client). As can be seen there has been a steady increase in volumes as
of December 2011. From the period 1 March 2011 to 30 September 2012 there was a total of 34 191 debt review proposals submitted through DCRS at consumer level and a total of 276 430 applications submitted at account (credit agreement) level.
9000
9,135 7500
6,237
7,539
2012 Q1
2012 Q2
6000
4,830
34k
4500
4,425 3000
1500
Debt Review Proposals
Credit Agreement Applications
as of 30th September 2012
2,025
0
2011 Q2
2011 Q3
2011 Q4
2012 Q3
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DCRS SOLVE RATES The first graph below shows the percentage of applications that solved when submitted through DCRS. The second graph below indicates the average solve percentage per product grouping. This has remained more or less constant since the inception of DCRS.
Solve Percentage per Product Grouping
Solve Percentage per Application 88
100
88
83
84
80
78
78
80
60
69
40
20
73
4 0
68
2011 Q2
16
68
80
76
72
59
85
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
Mo Mo Un rtga Un rtga sec ge, sec ge ure Ve ure & d hicl d e&
Un
sec
ure
dO
nly
Ve Un hicle sec & ure d
Sec
ure
dO
nly
FINAL APPLICATIONS AS A PERCENTAGE OF PROVISIONAL (SOLVED ONLY) Since the implementation of DCRS in February 2011 there has been a large discrepancy between the number of provisional proposals being converted into final proposals. The upward trend shown in the last quarter of 2011 has resumed and this will be monitored going forward. A workshop was held with industry players and the following reasons for the low conversion rate were sited; a) Credit providers not responding to the request for COB and/or provisional proposal within specified timelines or not responding at all; b) The rigidity of the rules and the treatment of non-consenting or non-participating credit providers; c) Debt counsellors not fully understanding the 2 stage process.
44%
75%
37%
53%
58%
19%
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
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CENTRAL DATA SWITCH (CDS) The decision by the NCR to continue with the Debt Help system is of major concern not only in terms of the time and money spent in developing the NDMA Central Data Switch system but also in terms of the risk to the industry and consumers in allowing possible reckless lending to continue. An analysis by the CPA shows that there is currently a 40 – 50% under reporting of cases under debt review. The NDMA will continue its attempt to understand what the real concerns are and hopefully it will be provided with the opportunity to address them. The issue of data security and access has always been a contentious issue which in our view is resolvable. If there are other concerns with the central data switch, whether legal or competition related, it would be beneficial for these to be put on the table, properly debated, and resolved. The NDMA will continue to attempt to engage with the NCR in this regard. CDS PHASE 1 The CDS project was divided into 2 distinct phases to facilitate the request by the NCR to take over the current Debt Help functionality. To this end CDS phase 1 was designed to facilitate the placement of the debt review flags on the credit bureaus and included the following; a) Routing of all debt review submissions from the DC system to the CDS b) Creation of a CDS front end to accommodate manual capture of debt review application (as per Debt Help) c) Automatic update of consumer debt review status on all credit bureaus currently receiving Debt Help data files. Progress to date: DEVELOPMENT
TESTING
ISSUES
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Development of the Debt Counsellor manual capture screens, CSV interface to credit bureaus, and DC System Vendors integration web service is complete. The credit bureaus have also completed their development based on the new formats. Three of the 5 DC System Vendors have completed their development and two of the vendors are busy with development. Internal testing is complete for CDS development, three of the DC System Vendors and all credit bureaus. End to end testing has started with all of the above parties and is 95% complete. The NCR issued a circular (circular 7) in mid-September. This circular prohibits the use of CDS by debt counsellors, and Credit Bureaus and as such CDS phase 1 has been pended until the matter is resolved with the NCR.
CDS PHASE 2 This phase will include all statutory data exchanges between the DC Systems, CP Systems and CDS for the following functions; a) Form 17.1 submissions
g) Termination advices
b) COB submissions
h) Form 17.4 withdrawal advices
c) Statutory documentation submissions including;
i)
Form 19 clearance certificates
j)
Debit Order cancellations
• Provisional and submissions
final
assessment
summary
k) DC 17.7 book transfer notifications
• Provisional and final debt restructuring proposals • Provisional and final payment plan submissions d) Responses and updated COBs e) Responses to provisional and final proposals
l)
Ad hoc communication between CPs and DCs
m) Actual payments made by PDA on behalf of consumer n) Adjusted PDA payment plans o) Set down notices
f ) Provision of regulatory as required by the NCR
Progress to date : DEVELOPMENT
ISSUES
Work has started on the prototype which is scheduled for completion in December 2012. Once completed all stakeholders will be invited to view and supply comment on the functionality. This functionality will then be formally documented and approved by all parties before final development commences. The release of circular 7 by the NCR has made all parties nervous about continuing with development on the project and the DC System Vendors have put their development on hold. This is not a show stopper at this stage but clarity on a way forward needs to be achieved by Dec 2012 if the project is to realise the planned implementation date of July 2013.
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COMPLAINTS AND ENQUIRIES
7173 5604 5392
The helpline fielded 5,392 and dealt with a total of 704 enquiries for the 3rd quarter, of which 697 (99%) have been resolved and 7 queries (1%) are currently pending. Unaudited figures show that the total number of complaints and requests for debt mediation received from July till September is 573 as compared to 817 in the second quarter, a decrease of 29.9%. A total of 301 cases were finalised (53%), 162 cases (28%) are still pending within the service level agreement of 20 business days, and a total of 110 cases (19%) are currently pending more than the 20 business days period. 65% were from consumers and 29% from debt counsellors. The rest were referrals from other entities.
7500
6000
2012 Q1 2012 Q2
62
4500
1500
0
Helpline
918 817 538
1117 1204 704
3000
2012 Q3
Complaints & Financial Hardship
Enquiries
COMPLAINTS RECEIVED AND RESOLVED Mediation continues to bear positive results as evidenced in the percentage of cases where successful resolution is achieved. If the out of jurisdiction, withdrawn and referred cases are excluded, the percentage of instances where we find in favour of the consumer increases to 67%. 13% of cases were referred to the NCR, debt counselling or the Credit Ombud.
Number of Cases Received
Resolved Reasons
0
Fin a
28.3%
100
110
200
52.5%
573 Cases
162
Total of
lise
d
19.2%
300
301
400
Pe SLAndin
gw
ith
Pe SLAndn in
gO
ut
of
If the NDMA is not able to resolve a matter within twenty business days the complainant has the option to escalate the matter to the Credit Ombud. Reasons for cases exceeding 20 days include: a) The quality of the complaint is such that further documentation or evidence is required and parties are slow to respond; b) A delayed response from the credit provider; 20
c) Debt Counsellor slow to respond to credit provider requirements; d) Consumer not able to provide required documentation; e) Complex case that requires involved investigation; f ) System errors in allocating cases; and g) Matters pended to allow the consumer time to access funds to be paid in the future to settle debts. Measures are being put in place to decrease this rate of “Out of SLA” cases and meetings have been held with those credit providers whose service standards were deemed to be out of line. The department’s constant request to debt counsellor’s to improve the quality of complaints has contributed to an increased resolution rate as excellent complaints are resolved effectively and thoroughly. A comparison of the top 5 category of complaints shows that there has been a decline in the number of complaints regarding vehicle repossession and termination from debt review. Legal action while a consumer is under debt review, property auctions and the rejection of DCRS proposal has been fluctuating. The rejection of DCRS proposals relates mainly to disputes regarding affordability assessments as well as lack of understanding by credit providers who have recently signed the Code. The NDMA has been engaging with the new credit providers as well as training them on the DCRS system.
77 75
2012 Q1 2012 Q2
54
60
54
75
79 77
90
2012 Q3
Legal Action while in DR
Rejected Proposals
20
24 18
15
24 18 32
12
30
24
26
45
0
Termination from DR
Car Repossessions
Property Auction
FINANCIAL HARDSHIP CASES 24% of the cases dealt with were specific requests for debt mediation, where the consumer had received a section 129 notice, had temporary financial difficulties or opted for mediation. Of the 139 cases received in this category, 104 were finalised. Of those finalised, 54 were successful, 21 unsuccessful and the rest were referred or the consumer chose the consolidation route.
Q3 Status of 104 applications processed
21
The following were the main reasons provided by the Financial Hardship team for unsuccessful applications: a) Unemployment
f ) Income dropped due maternity leave
b) Negative cash flow as the debts are more than salary
g) Previous DR /DC matter:
c) Arrears are high and account is in late stage collections
• Consumer defaulted on payments • Consumer still in debt review
d) Previous concession granted:
h) Deceased Estate
• Active arrangements • Extension arrangements e) Default on concession
The downward trend in number of cases follows the same downward trend experienced in inflow. There has however been an increase from 21% in Q1 to 52% in Q2 and Q3 respectively in the number of successful resolutions. This is indicative of the team focus to provide quality solutions to consumers. Referred cases are defined as cases that required a different solution to what the NDMA can offer. These consumers are then referred. The number of consumers referred to date total 25 and this includes referrals to either of the following categories:
DC/NCR/DR This category is made up of: a) Enquiries to enter into DR b) Requests to obtain information on current debt review status c) Consumers needing to select a DC and were referred to the NCR
Withdrawal This category includes instances where the consumer withdrew from the process and the main reasons for withdrawals were: d) Consumer was assisted to resolve the difficulty with the help of friends or family. e) Alternative solution found but consumer did not want to disclose remedy. f ) C onsumer advised that the options provided was not the remedy the consumer wanted as it includes lifestyle adjustment.
Accepted Accounts
Home Loans Unsecured
450
375
223
300
225
155
VAF
386
The graph indicates the successful matters per product and not by consumer. It is evident that the consumers who approach the NDMA Financial Hardship Team for assistance mainly do so for unsecured debts. The 386 accounts represent 159 consumers with an average of between 2 to 3 credit agreements each.
150
24 4
1 3
27 9
0
2 2 8
75
Total Jan - Mar
Total April - June
Total Jul - Sep
Total Year to Date
Q2
Q3
Q1
22
COMMUNICATIONS AND CONSUMER/ STAKEHOLDER OUTREACH The quarter was marked by a relatively busy period that was accentuated by the challenges presented by the unfavourable media coverage about the NDMA as a result of the communiquĂŠ issued in early August by The Debt Counselling Industry Portal (DCI) regarding their concerns about the VDMS Pilot Project, as well as the subsequent findings of the NCR around the same Pilot project. MEDIA RELEASES A total of seven (7) press releases were issued during the quarter. The month of July saw the NDMA issuing a press release highlighting the results contained in the NDMA Annual Report, as well as another which focused on the high costs of avoiding Section 129 notices. The majority of press releases (4) were issued during the month of August and sought essentially to address the concerns raised by the DCI whilst simultaneously highlighting the mandate and focus of the NDMA. One (1) press release issued in September focused on how all forms of consumer debt need to be dealt with by debt relief provisions.
MEDIA LUNCHES A total of 4 media lunches were held during the month of September in Durban, Cape Town and Johannesburg. The media lunches were structured as informal sessions with a select number of journalists who received first hand information about the purpose and mandate of the NDMA. Industry representatives were also present.
Advertorials Two advertorials were prepared during the month of September. The first was submitted to New Agenda Magazine and the second for the Banking Association’s Financial Inclusion Indaba supplement in Aspire Magazine. a) New Agenda Magazine is distributed locally, continentally and internationally to government departments, corporate, universities and technikons, African heads of state, economic and development agencies, Nepad, African Union, World Trade Organisation, International Monetary Fund; and the United Nations Development Programme (UNDP) amongst others. 23
b) Aspire Magazine is a quarterly business magazine focusing on socio-economic development issues. The Financial Inclusion edition provided an opportunity and platform for the NDMA to showcase its activities and business in the Financial Inclusion space. This particular supplement was distributed at the Indaba on the 21st September 2012 as well as at the Alliance for Financial Inclusion Global Policy Forum which took place on 26 to 28 September in Cape Town, amongst other distribution channels.
COVERAGE & ADVERTISING VALUE EQUIVALENT (AVE) During the quarter, the NDMA was covered 72 times in various print media, 54 times in broadcast media, and 68 times in online media. The total AVE for the quarter amounted to R6,769,875.00 . The coverage and AVE for each month is detailed in the graphs below. Coverage for the results of the NDMA’s Annual Report which was released in July is also detailed below.
3 600 000
420
Broadcast Online
3,20
390
3 300 000
Million
360
3 000 000
330 2 700 000 300
1,85
270
Million
240
210
Million
159
1 500 000
150
Annaul Report
84 39
54
600 000
21 25
11 6 0
0
14
60
30
1 200 000
900 000
57
90
622
Thousand
94
120
2 100 000
1 800 000
1,08
180
2 400 000
300 000
0
July
August
September
EVENTS/CONFERENCES/WORKSHOPS ANNUAL REPORT LAUNCH EVENT The launch of the NDMA’s inaugural Annual Report took place on the 24th July 2012 at The Venue Conference Room in the Melrose Arch Precinct in Johannesburg. Invitations were sent to a total of 92 stakeholders and we had an attendance figure of approximately 65 guests excluding the media. The media was represented by journalists from the following media houses: MoneyWeb, FinWeek, SABC 3 News, Sunday Times, New Age, Lesedi FM. Presenters at the event included NDMA CEO Magauta Mphahlele who provided an overview of the results of the Annual Report, as well as NDMA Board Member Christo Otto, Reana Steyn from the office of the Credit Ombud, and Paul Slot from the Debt Counsellors Association of South Africa (DCASA). Entertainment was provided by the talented Muses, whilst the evening’s proceedings were skillfully guided by the knowledgeable and good-humoured Peter Ndoro.
STAKEHOLDER EVENTS STAKEHOLDER
EVENT
DATE
COMMENT
NATIONAL MOTOR FINANCE ASSOCIATION (NMFA)
Conference
17-Aug-12
NDMA CEO Magauta Mphahlele was invited to speak at the NMFA Conference. NDMA Annual Report and Quarterly Report were distributed to delegates.
DEBT COUNSELLORS ASSOCIATION OF SOUTH AFRICA (DCASA)
Conference
22-Aug-12
The NDMA was highly visible at the DCASA Conference which was held on the 22nd August 2012 at Emperors Palace. Once again, NDMA CEO Magauta Mphahlele was invited to speak at this event which saw close to 300 DCASA stakeholders attending. Ms Mphahlele addressed the concerns raised by the DCI around the VDMS Pilot project and answered questions fielded by delegates. The NDMA’s Central Data Switch (CDS) Project Manager, Mrs Caroline Smith was also requested to present at the Conference. In addition to the presentations, the NDMA supported DCASA by taking part as an exhibitor. NDMA Case Officers were on hand to answer questions from delegates. An advert was also developed for the DCASA newsletter which was distributed to stakeholders during and after the event.
MICROFINANCE SOUTH AFRICA (MFSA)
AGM & Conference
06-Sep-12
MFSA held its AGM and Annual Conference on the 06th September 2012 at The Forum, The Campus in Bryanston, Johannesburg. The NDMA took part in the exhibition and was present through the course of the day to answer questions from delegates.
STAKEHOLDER COLLABORATION The NDMA is participating in the Provincial Capacity Building Project, an initiative which seeks to provide information to stakeholders from the provincial Consumer Affairs/Protectors offices. Below is a list of stakeholders participating alongside the NDMA. a) Financial Services Board b) National Credit Regulator c) Council for Medical Schemes d) Independent Communications Authority of South Africa e) Council for Debt Collectors f ) Ombudsman for Long Term Insurance g) National Debt Mediation Association h) Retail Motor Industry Organisation Date
Venue
06-Nov-12
KZN
07-Nov-12
KZN
13-Nov-12
Eastern Cape
14-Nov-12
Eastern Cape
20-Nov-12
Western Cape
21-Nov-12
Western Cape
27-Nov-12
Northern Cape
28-Nov-12
Northern Cape 25
NDMA PARTNERS WITH SASI The NDMA together with the South African Savings Institute (SASI) are excited to embark on a collaboration to educate the youth and elderly on how to save. A recent study shows that currently only 10% of the South African population is saving. The major culprits among the remaining 90% that do not save being the youth and elderly. Furthermore, a higher debt accumulation is seen during the festive season and the immediate period after. During the months of November 2012 and March 2013, the NDMA and SASI will be running the “Festive Season Savings Campaign” and the Varsity Financial Literacy Campaign respectively. The NDMA will be making a substantial financial contribution to both campaigns. The Festive Season Savings Campaign and the Varsity Financial Literacy Campaign will amongst other objectives, seek to: a) r aise awareness about and including the culture of saving around the festive season and to raise the level of awareness among students, about the benefits of savings and financial planning; b) g uide consumers on how to avoid unnecessary expenditure by planning and carefully budgeting, to ensure that they meet their obligations that follow immediately after the festive season e.g. school fees and school supplies; c) provide information on the basic savings skills e.g. reasons to save, budgeting, money management, etc d) to equip students with skills that will help them make the most of their earnings, whether small or large amounts of earnings; e) to assist students adopt an enterprising mind and plan for their future even before they receive their first earnings, thus reducing pressure on their guardians; and f ) ultimately, compliment previous messages. Both the NDMA and SASI feel that this will go a long way in creating the culture of responsible financial planning and to cement previous campaigns/messages about responsible spending together with trying to alleviate over-indebtedness.
COMMUNITY SERVICE On Friday 21st September 2012 the NDMA staff paid a visit to Harties Safe Haven in Hartbeespoort bearing special gifts including some old pieces of NDMA furniture as well as a selection of goodies and clothing collected by the NDMA staff. The Haven, which is currently home to 27 children ranging from 1 month to 14years of age, is presently the only place of safety in the Hartbeespoortdam/Brits area for children or victims of domestic violence. Some of the children have been previously sexually assaulted. The children stay at the haven until the end of their court cases or until they are fostered. The haven was recently in the news when 3 young brothers lost their lives when a fire broke out, completely destroying the wooden house they were sleeping in. The three young boys were orphaned and had been in the haven’s care for about 14 months.
NDMA STAFF SINGING FOR THE CHILDREN
26
CASE STUDIES CASE STUDY (1) SEPTEMBER 2012 Consumer harassed for payment despite paying in terms of a court order CLIENT’S APPLICATION FOR ASSISTANCE DETAILS OR SYNOPSIS OF THE MATTER
a) Consumer is a 40 year old married man with 2 school going children. b) In 2008 the consumer sought the assistance of a debt counsellor as he had incurred debt of approximately R317 000 and he was struggling to meet his monthly obligations towards the repayment of his debts. c) T he Consumer was one month in arrears when he visited his debt counsellor and his main cause of concern was his immovable property. d) T he Debt Counsellor was successful in rearranging the consumers’ debts and securing a court order for the consumer’s debt to be restructured. e) T he Consumer however continued to receive random calls from his credit provider who advised that his home loan was in arrears and that they would proceed with legal action if he does not settle the arrears. f ) T he Consumer only contacted his debt counsellor and advised them of the harassment when it became too much to bear. g) T he Debt Counsellor contacted the Credit provider and the Debt Counsellor was surprised to learn that the consumer’s Home Loan account was terminated from debt review. h) T he Debt Counsellor contacted the Credit provider with the aim of resolving the matter however they failed to reach resolution with the credit provider who insisted that they had the right of termination.
FINDINGS
a) The consumers’ contractual instalment for the home loan was approximately R3060 per month. b) The proposal of R1994 was declined by the credit provider. c) T he Debt Counsellor referred the matter to court and the court found that the consumer could afford the amount of R1994.93 towards the home loan. d) The Consumer has not defaulted on the repayments ordered by the court.
NDMA ACTION
a) The NDMA lodged a complaint with the credit provider and highlighted the facts of the case. b) N ot much action was required by us as the Credit provider called for an internal investigation upon receipt of the complaint.
CASE OUTCOME
The account was reinstated back into debt review as per the order granted and all telephone calls to the consumer regarding non-payment of the home loan were stopped.
CASE STATUS
Resolved
SNAPSHOT OF CASE STUDIES : REASONS FOR OVER-INDEBTEDNESS MATERNITY LEAVE
A 22 year old female with and income of R4,017, total debts of R33,500 and monthly instalments of R2,700 could not service all her debts as she did not make financial provision to go on maternity leave. She needed a temporary arrangement until she returned to work and received a full salary again. An arrangement was made with three of her creditors and her monthly instalments reduced from R2,700 to R700 per month for the duration of her maternity leave.
DIVORCE
A 40 year old female got divorced. Her ex-husband stopped paying for a vehicle which she had bought for him in her name. She now had to pay for two vehicles one of which was written off and the insurance claim was repudiated as her ex-husband’s younger brother drove it without having a valid license. Her total debt were 316,000 with an income of R17,199 and monthly instalments of R15,228 including the portion that was previously paid by her husband. She was more than three months in arrears with some of her agreements while others were up to date. Arrangements were made to bring her payments up to date.
DISMISSAL
A 40 year old female was dismissed and could only find another job that paid less than what she previously earned. Her total debts amounted to R32,562 with monthly instalments of R1,782 which she could not afford with her reduced income of R3,000. The consumer’s five credit agreements were already handed over to attorneys to commence with legal action. The NDMA was able to negotiate arrangements with the attorney’s for a total repayment of R900 per month. 27
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tel 0861 11 6362 (NDMA) fax 011 781 0589
web www.ndma.org.za e-mail info@ndma.org.za