Debtfree DIGI June 2016 by Debtfree Magazine

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June 2016 www.debtfreedigi.co.za

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CONTENTS NEWS

CALL CENTRES

MONEYWEB VS NCR

R300 MILLION FRAUD

DEBT REVIEW AWARDS

SERVICE DIRECTORY

EDITORâ&#x20AC;&#x2122;S NOTE Time flies. This is sometimes a scary thing. Before you know it summer is a distant memory, your new years resolutions seem like a faded fools dream and it is the heart of winter. We often get caught up in the day to day, week to week that we fail to see time slipping by at an alarming rate. Blink and you may have been too busy at work trying to earn a living and support your family that you may miss your kids growing up entirely. Blink and you may have spent every week so stressed and every weekend trying to recover from work that you find a decade can slip by before you know it. With just a few days till the 2016 Annual Debt Review Awards it is hard for any of the Debtfree Magazine team to concentrate on anything else. For us the last year has flown by and here we are again about to host what we hope is a fun and encouraging Debt Review Awards gala. The results of the industry wide peer review will be announced (more about that in this issue). The top 5 DCs in various categories will be announced and the winners will get their golden piggy bank awards on the evening. We wish everyone the all the best for that.

also go where angles fear to tread in the first part of a series of articles called Call Centre Debt Counsellors - The Big Debate. Do the NCR want to get rid of these massive operations or not? We have newsletters, explain why ratings agencies matter, discuss increased fees and more. So, take a moment to enjoy the issue. Often people, who find they are in a bad financial situation because of a financial reversal or perhaps a big unplanned for expense, feel that the last few years of their career or worse their life have been a waste and that they have actually move backwards in life instead of moving forwards. This is naturally incredibly frustrating. We all want to make progress and improve our lives. This is totally normal. The good news is that, as scary as it is when time slips by it can also be a blessing for those under debt review.

By entering debt review consumers are finally taking positive steps to move forward with their finances. Those under debt review will tell you that it is however a long process. Thank goodness time flies. Before you know it This issue we also take a look at news like: half a year has shot by and then another and how Japanese crooks defrauded an SA bank before you know it, it is time to pay off that last out of millions using SA consumers cloned account and be debt free. bank cards. We discuss some recent circulars and changes to the way things are done in the industry and consider how this will effect consumers and Debt Counsellors alike. We

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Consumer Friend Upgrading Their Phone Lines

This month Consumer Friend (who represent many different credit providers in regard to debt review) have taken steps to improve their phone system. Those who have dealings with Consumer Friend will be aware that their have in the past been some issues with calls being dropped and having to call multiple times in regard to different accounts for different consumers. All of which was giving both Debt Counsellors and the team at Consumer Friend under unneeded stress. The new improvements will assist in Consumer Friend’s recent efforts to speed up their response times and communication channels. Consumer Friend will now have a new call centre number for all debt review related matters: 031 251 4151

S&P Maintain Rating

Rating agency Standard and Poor’s (S&P) have decided that, though the future is not exactly rosy for SA, their previous ratings from SA’s Long and Short term foreign and local currency bonds should remain the same. Though the ratings are low they are not as bad as it gets and SA has been sitting on the razors edge of a “Junk” status for a while now. For now the ratings will stay BBB-/A-3 and BBB+/A-2. S&P have indicated that they are still

very worried however this current affirmation of their previous rating allows some time for the effects of the recent positive moves economically (and re the post of Finance Minister) to potentially take effect. This will then in turn allow them the chance to review their decision later at year end.

Fitch Keep SOUTH AFRICAN Rating As Stable

Ratings Agency Fitch Ratings has followed suit with Moodys and S&P in maintaining their rating of SA’s Foreign currency rating. At present Fitch has SA’s Foreign Currency Rating at BBB (which is still a... OK you could invest in this if you wanted to rating). A lot of people have been worried that that rating would drop due to lots of negative economic factors. Recently reports of things like: the economy shrinking by 1.2% , the replacing of Finance ministers x 2, high levels of debt and fiscal deficits have really not been helping SA’s rating at all. At the same time there are a number of positive factors about SA which, it seems, have helped offset a reduction in the rating for now. The rating announcement comes after Moodys and Standard & Poor’s recently announced they would not be changing their rating. Moodys seems to be the most optimistic about SA foreign currency rating while S&P and Fitch have been giving SA a lower rating awfully close to junk status. Though this is a temporary

NEWS CONTINUED positive step most analysts are saying we should expect at least one of the 3 agencies to downgrade their rating to “junk” status by year end should things not turn around significantly. Reviews are typically done in December.

African Bank Now To Restructure Upon Acceptance

The good people at African Bank have recently made a number of system improvements which is allowing them to come into line with the procedures followed by most other major banks in regard to restructuring debt for those under debt review. One of these enhancements has to do with when they adjust their system to reflect a debt restructuring proposal from a Debt Counsellor. In the past African Bank has been happy to work with Debt Counsellors and to accept proposals they make (should it meet certain internal requirements). They seldom felt the need to go to court and fight about debt review matters even if they were not entirely happy with proposals. African Bank were prepared to wait on the court to use it’s discernment and then to act on instructions in the Court Order. However one issue that arose was when they did so many months would have gone by in waiting for the court order and during that time the consumers account would have accrued numerous fees and interest which would drive the account balance up and differ greatly from the proposal which the court had signed off on. In some cases (a long while back) some courts were notoriously slow and had delayed debt review matters for years before rendering judgment. This meant that the figures shown in the court order and on the PDA systems (who send statements to

consumers of the payment plan and payments done) little resembled what African Bank would demand of consumers. With the current system enhancements African Bank will now be able to enact the debt review proposals the minute they are happy with it. Once they have received a proposal from a Debt Counsellor which is fair and equitable among all creditors (a big part of the process is to balance the needs of all creditors and not one over the other) and which shows a realistic budgeting change by the consumer in an effort to free up funds for debt repayments, they now can load the change onto the system. This means that from that point their calculation and those of the PDA systems will be much closer to one another. It means that the consumer will immediately begin to see the effects of the debt review and it means that years down the line there will be less fighting about adherence to court orders and end balance disputes.

DTI Release Increased Registration Rates

The DIT recently put out for comment an increase in the fee Debt Counsellors (and others) have to pay each year to the NCR in regard to their registrations. This annual renewal fee has been R100 for many years now. The recent draft document saw a proposal of pushing that cost up drastically to R500. Various concerned parties commented, including the Debt Counsellors Association of South Africa (DCASA) who suggested a more moderate increase. They were not alone in their suggestions as many in the industry felt that such a huge increase was not warranted. The DTI have now issued the new fee regulations in regard to renewals in the

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NEWS CONTINUED government Gazette and the figure which has come back is actually higher than they had first proposed. As of this month Debt Counsellors who want to renew their certification will have to pay R550 / annum. The NCR has recently taken upon themselves the mammoth task of not only issuing each Debt Counsellor a certificate when qualifying and being registered but also issuing printed copies of certificates to all registered parties every single year thereafter (with a year date). The NCR has, in the past, had a reputation for the long turn around times from application to registration. They now also face a challenge in that the DTI has changed the definition of a credit provider (who would then need to be registered and receive certificates) to a much broader definition as anyone who lends anyone else money and charges any fee or interest on the amount. This is no doubt in an effort to clamp down on small loan sharks. The adjustment of the fee to such a remarkably high amount is probably tied into the desperate need the NCR will have to cover additional printing, shipping and organising costs in tracking who has their “current” certificate. They will no doubt need to take on many additional staff to facilitate this new process. If they do not do so then disaster lurks on the horizon. Additionally it seems to many that the NCR hope to see the large number of registered but non practicing DCs cancel their registration or not pay.. Sadly this may well be the case, meaning less people will in theory be able to assist troubled consumers (without going through the application process again which as mentioned is incredibly time consuming for some reason). At present of the thousands of people who have qualified few practice as they find it to be unprofitable or too complicated and difficult.

This whole thing does somewhat have all the hall marks of a plan which may backfire... Let’s hope not. In a somewhat amusing anecdote one DC reported that he recently received his new certificate from the NCR. Sadly the annual expiry date was the day following the day he received it. This means he could in theory only practice for 24hrs before needing his next certificate. It seems it was on back order for a long, long time or maybe it was just a glitch in the new system. Though there has been a declaratory judgment on the matter some courts still ask that the Debt Counsellor include proof of being up to date with the NCR in court applications. This becomes important when the court case drags on and the certification on file expires in the meanwhile and needs to be updated. Should the NCR delay the court case may even be thrown out. In extreme cases this might result in the consumer losing an asset. Imagine if a consumer’s home is lost as a result of a bad combination of a debt review court case thrown out and an unreasonable credit provider pursuing additional legal action due to the debt review falling apart. The consumer might then sue the Debt Counsellor who in turn, would not easily be able to take action against the NCR. This may then leave the Debt Counsellor and consumer in a world of trouble. It remains to be seen if the NCR can deliver on their ambitious plan. This renewal fee structure will also apply to other types of registrants as well including, in theory, if not practice any consumers who lend anyone else money and charge any type of fee. Due to changes in the law anyone who does charge fees or interest on any amount loaned to anyone is considered a credit provider and needs to register with the NCR. This would apply to even a single loan of R1 at 2% interest per annum.

NEWS CONTINUED

NCT Motion Court Chipping At Backlog

The National Consumer Tribunal (NCT) is empowered to handle debt review matters where a consumer is not yet in trouble but about to be and approaches a Debt Counsellor. The Debt Counsellor then speaks to all the consumers creditors about their proposed plan. If all agree to the plan (for instance through a debt restructuring calculation software programme like DCRS) then the Debt Counsellor can take a draft consent order to the NCT. If even one of the creditors doesn’t agree (or if the consumer is already over indebted) then the matter needs to go through the normal Magistrates Court process. This is significantly more expensive than the NCT process. This is one reason why many Debt Counsellors try to refer matters to the NCT. Also due to changes in the National Credit Act (NCA) the NCT now also have the power to rule in regard to “reckless credit” matters – something they could not do before. Due to these changes and the drive by the Banking Association of South Africa to get Debt Counsellors to use the DCRS software for proposals (and the high adoption among larger debt counselling firms) the NCT has been swamped with applications. Though they had asked for and received additional powers when the NCA was amended they had not taken on many more staff in anticipation of the swell in case numbers. This lead to a huge backlog with regard to debt review matters in particular. The NCT say they are receiving about 1600 debt review related cases (about 12 000 people enter debt review monthly) and that they are trying to clear a backlog of about 11 000 cases. To help deal with the backlog the NCT have arranged a series of roving motion

courts across the country. This enables them to travel to one area and try to close out as many debt review related cases in one sitting as possible. Their recent visit was to Cape Town during June. The Motion Court hearings will continue to be held at other venues, in other cities in the months ahead as the NCT take a sledgehammer to the backlog.

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R300 Million Stolen In Japanese Fake Card Scam

As consumers and bankers in South Africa went to sleep the sun was rising over one of the most ambitious ID fraud scams in Japanâ&#x20AC;&#x2122;s history. Starting at 5am (in Japan) over 100 different sneaky fraudsters started to draw money at over 1400 different ATMs and stores all over Japan. By 8am they had disappeared into the wind, gone with over R300 Million in cash. In total, these fraudsters made over 14 000 transactions in just 3 hours. The truly horrifying aspect of the story is that they were using fake credit cards cloned from 1600 different Standard Bank clients from South Africa.

Sadly it is not just overseas where this financial fraud happens. Many consumers have found out to their shock and surprise that it is on the go right here in SA as well. This type of fraud has, in fact, steadily been on the increase in SA over the past few years despite our banks being some of the most vigilant and innovative in the world. The smarter the banks and we consumers become about these things the smarter the crooks are getting and losing control of your credit through identity fraud can derail your financial plans and destroy your credit history good-standing. So, if the full extent of your efforts to protect yourself in the past has been to cover the key pad of the ATM with your one hand while typing in your pin with the other then you need to be aware of some other very real threats to your financial information or you might find yourself somehow drawing cash at an ATM in Japan at 5am while actually still asleep in your bed on a cold winters night here in SA.

Top Ten Wish List For Fraudsters Here are the top ten things that crooks want to get from you. Forearmed is forewarned so consider if you ever part with this information and who it is really going to. 1. An old bank statement If the crooks get lucky, your statement will show all your overdraft limit along with your full name, address and account number. Do you casually toss these into the trash? 2. A credit card statement While this won’t contain your PIN Number and thus cant be used locally at a shop it could be enough to buy from some foreign websites. (“Honey, why did we buy1000 DVDs from a shop in Ukraine?”) 3. Access to your social networking page Desperate for friends? Well, just accept absolutely anyone who asks, onto your social media accounts. Here you might display your date of birth, spouse and children’s names, and enough information for a ID thief to guess your PIN and passwords. Time to change your password from “password” or your childhood dog’s name? 4. The short security code on the back of your credit card This is used to prove you are in possession of the card when you buy online, or by mail or telephone order. Fraudsters who have managed to get hold of a name, address and card data are now calling or e-mailing people pretending to be security staff and asking for the code, which frees them up to steal even larger sums. Watch out! 5. Your drivers licence or passport Photo ID can be amended by an expert and used to prove that he or she is actually you. 6. The reply to a phishing (Fishing) e-mail The bank emails you and asks you to go online and do something. However to do so you have to click a link they provide to a site that looks a lot like the real one and then asks you to log in. Remember, your bank already has all your info – they won’t email you asking for it. This is the tip of the iceberg when it comes to this sort of email. It seems hardly a day goes by without you winning a lottery you never entered, meeting a foreign prince or getting an inheritance from an uncle no one in your family knows about in a different country. Remember that if it sounds too good to be true, it usually is. 7. Your PINs and passwords These are essential if a criminal wants access to many of your accounts or to use your payment cards. Don’t save your pins to your cellphone contact list or write them down on a note in your

wallet. These might get stolen and sold to sneaky fraudsters. And no one from the bank will ever ask you to tell them so they can enter it into an ATM. 8. A Catalogue mailed to you It may seem silly but these could be stamped with your name, address and account number, so a thief could phone up, claim you’ve moved homes and then hijack your spending limit and have shipped to another address before moving on. 9. Your CV Here is a scary one especially if you are on the hunt for work. Think about it: your CV usually has your name, address, date of birth, employment history, and marital status. Your CV contains so much information that could be used to impersonate you that some online job search services are now advising people not to include so many details. If you need to send your CV for a job application, Google the company first and double-check email addresses. 10. Online banking information A prime target for credit-hungry fraudsters, who often set up fake websites to con genuine account holders into parting with their access data. Never click a link in an e-mail directing you to a supposed banking site ― it could be a trap. Instead, memorise your banking website address and type it in. Look for the little lock symbol in the address bar of your web browser too. Better yet, bank from your banking app on a smartphone or tablet. These are some of the most secure forms of electronic banking. Sadly most people who are victims of ID Fraud don’t realise until weeks or eve months after the event. Checking your credit report regularly will reveal if your name has been used to open new accounts. Enquiries about you (which is also shown on your report) from companies you’ve never applied to could indicate that someone is trying to impersonate you to get credit. Get Your Free Credit Bureau Report Did you know that you are entitled to one free report from each of the 13 SA credit bureaus per year. The 1600 different SA consumers, whose information was cloned and used in Japan, were very relieved to learn that the bank and not they would be covering the massive amount stolen. Between write offs and insurance claims Standard Bank are doing the noble thing and eating the loss themselves. Even if a few of the hundred Japanese fraudsters are ever caught that cash is now long gone. It is now a case of figuring out how the fraudsters got the information needed and making sure it doesn’t happen again. Make sure you are not the next victim of ID fraud and try to avoid giving these fraudsters access to their top ten favourite things. * Thank You to by Marina Short, CEO of CPB (a member of the Credit Bureau Association) for her contribution to this artilce.

Moneyweb Vs The NCR For years various parties across the debt counselling industry (like theDCI’s Deborah Solomon) sounded alarm over a possible growing unsecured credit bubble and the fall out which might result. Others denied that there was any cause for concern. At the same time Debt Counsellors also warned that possible cases of reckless credit granting was happening at major SA banks such as African Bank*. Little did they know that the giant bank would soon run aground as it’s share values fell through the floor in a sudden collapse after the founder announced he was leaving and the bank reported that they needed to find an incredible amount of additional investment since people were not paying their debts. In an effort to gain total clarity on the subject of why the bank failed the Myberg Commission was tasked with investigating the causes and report. Popular financial website Moneyweb recently ran a series of articles regarding the Myberg Commission report. In the articles they called into question the South African Reserve Bank’s (SARB) role in squashing the NCR’s proposed R300 million fine of African Bank down to only R20 million and they poked at the NCR’s lack of cooperation with the Myberg Commission. In turn the NCR have announced they are actually investigating African Bank and that the reports didn’t take several other key factors into account. NCR Punish African Bank’s Recklessness A R300 million fine was proposed by the NCR soon after African Bank’s internal auditors turned up irregularities at the Dundee branch of the credit provider. They had identified several consumers whose information on the system appeared to have been manipulated by staff members to grant loans. The NCR then swooped in with a short investigation into the same matter and their referring the credit provider to the NCT and calling for a company wide investigation/audit and a fine in regard to the breaches at Dundee to the tune of R300 mill made headline news. The NCR even went so far as to call for the Dundee branch to be closed down. MoneyWeb Question SARB Involvement The case never progressed to the NCT hearing phase, the proposed R300 million fine was reduced down to, what the press called a comparative slap on the wrist of R20 mill and the branch was

never shut down. The Moneyweb articles alleged a link between the SARB getting involved and the whole matter being minimised. In their articles they looked at the timing of certain events and draw lines seeming to indicate that once the SARB got involved things shifted from a massive company wide investigation and huge fines to something a lot less impactful. Did this help to perpetuate the banks appetite for giving out credit with little to no chance of getting it back?

‘The case never progressed to the NCT hearing phase, the...fine was reduced down to what the press called a comparative slap on the wrist of R20 mill and the branch was never shut down’

NCR Refuse To Help Commission The Myberg Commission report indicates that around 60 to 80 claims of reckless lending were being made at the bank each month (mostly by concerned Debt Counsellors) prior to the banks collapse. Those were from the Debt Counsellors who were brave enough to even venture into the reckless lending issue. The Commission asked the NCR for assistance with their investigation and interestingly the NCR turned them away. The NCR said that the commission looking into matters undermines the NCR’s role and authority. As such, they provided the Commission with no information. As a result of the NCR refusing to provide information and since nothing was ever resolved at the NCT the Myberg Report simply stated that there is a possibility that the claims of systemic reckless lending were true. Certainly many Debt Counsellors who investigated these matters felt so. Eg. just 60 claims a month x the +-12 months between the NCR asking for the fine and them later changing their mind about the fine (and the bank then collapsing) = 720 possible cases. Billions Lost, Millions Gained The 477 page report does indicate that although African Bank lost about 6.4 Billion in 2014 and realised they needed to somehow get another R8.5 Billion in capital to stay afloat, over the time leading up to his [basically] forced resignation Bank CEO Mr Kirkinis (and his family trust) were able to enjoy around R286 Million in dividends before it all came crashing down.

NCR Investigate African Bank Once the news about how the NCR had refused to assist the Commission in their investigation came to the fore, it seemed to the public as if the NCR had been uninterested in knowing the depth of any possible reckless lending practices at African Bank*. Further articles released by Moneyweb even implied that the NCR had been powerless to stand up to the influence of the SA Reserve Bank (SARB) in getting their allegations regarding the 2012 reckless lending cases to be heard at the NCT. Soon the NCR announced that they are, in fact, going to investigate the now defunct bank in regard to their past lending practices. The NCR’s Secretary Mr. Mashpa has said that the NCR have always wanted to conduct and audit of African Bank over reckless lending. The NCR also informed the media that although they didn’t give the Myberg commission any information directly, they had informed the SARB. Since the SARB had been assisting the Myberg Commission with their investigation they felt it natural that the SARB would pass their information along (regardless of if it would undermine anyone). So, it seems that finally, years after African Bank themselves identified a problem with a few loans in a small regional branch which lead to the call for a R300 million fine and full internal audit, that the now deceased bank will finally be audited by the NCR in regard to probable hundreds, perhaps thousands of reckless lending complaints by Debt Counsellors (such as Mrs Solomon) over the years. It is currently unclear how this investigation might effect those consumers who have / had past possible reckless loans with African Bank that have been shifted over to the renamed Residual Debt Services. This is the new name of the entity that owns all the old African Bank’s bad debts. At present the new African Bank* collect debts that were owed to the old African Bank (RDS).

* Please note this article and the MoneyWeb article refer to the old African Bank and not the new, better good African Bank. We know it is confusing because they look the same and operate out of the same old offices but they are not the same company, really.

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The Great Call Centre Debate

The chances are that if you have Googled the word Debt Counselling in order to find help that you will end up dealing with a large Debt Counselling firm which runs what has been termed a “call centre” operation. This means that you speak to people over the phone (or perhaps over email) who gather information from you and perhaps tell you about how debt counselling works. While you know the person works at a debt counselling firm you would not be sure if they were a Debt Counsellor themselves. Many large firms have several Debt Counsellors in various posts across their business. In others you may find that there is only a single Debt Counsellor with a large number of staff who deal with clients. Other than explain how debt review works the person on the phone may assist in helping a consumer fill in an application form. Once received members of staff may perform data capturing functions and transfer this information to a computer system provided by either a software firm or a Payment Distribution Agency’s subsidiary software department. This software is really great and even integrates with proposal software provided by the banks (DCRS) or by the PDA which helps look at the most fair way to split your available funds up and repay your credit providers. It would be realistic to say that though a Debt Counsellor makes a proposal this software helps create that proposal almost 90% of the time. Regardless of the internal set up at some point your papers will end up on the desk of the Debt Counsellor who will have to “sign off” on your matter. The Debt Counsellor may have to make adjustments to the proposal as suggested by the software or may have to look at things the software can’t factor in itself like the sale of assets or future changes to the consumers situation. Regardless the Debt Counsellors signature will be on all the proposals sent out and ultimately the proposal to court.

NCR Warn Against Dealing With Call Centre Agents The NCR have paid a lot of money to advertise on giant billboards against dealing with call centres when applying for debt review. Though the message is short and not very informative it is clear that the NCR have concerns. Because the message on the billboards is quite vague it almost seems to be warning consumers off entering debt review rather than promoting the industry. Are the NCR against call centres? Are all call centres bad? Letâ&#x20AC;&#x2122;s delve into the possible reasons, the real causes for concern and what consumers need to keep in mind when considering using a large debt counselling firm. Are Call Centres Bad? Well, the NCR are not concerned about all types of call centres. Call centres are now a way of life and hardly a week goes by without someone from a call centre contacting you these days about a new cell phone contract, more insurance or yes, how to deal with debt. The NCR do not think that all call centres should be closed down just because it is irritating to get a call after work about another mobile phone deal. That would be anticompetitive and would hardly be possible. So, no. The NCR obviously doesnâ&#x20AC;&#x2122;t think that all call centres are bad. Where the NCR are interested is when the call the consumer gets is about debt and debt review. The telephone is an amazing tool just as the internet has helped reinvent the modern business world giving millions of people access to services they might never have had before. These days with smartphones this is even more prolific. An increasing amount of South Africans are shopping on line for everything. From groupon deals for deal to grocery shopping that will be delivered to your door. In fact, the use of long range communication avails previously isolated consumers access to big city services. Note this excerpt from the National Credit Act about the purpose of NCA The National Credit Regulator is responsible to (a) promote and support the development, where the need exists, of a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry to serve the needs of(i) historically disadvantaged persons; (ii) low income persons and communities; and (iii) remote, isolated or low density populations and communities, in a manner consistent with the purposes of this Act; It has been argued that since there are currently so few practicing Debt Counsellors (and since the Regulator has done little to crack down on illegal debt mediation which is basically debt review outside of regulation and offers no legal protection) consumers in remote areas do not have access to a local Debt Counsellor. Rather they are more likely to find a local loan shark or

mediation scam. Thus if they want to get legitimate help from a NCR regulated and registered person they probably need to look online or call a debt counselling firm far away from where they live. The NCR, of course, want people in rural areas to have access to Debt Counsellors and so cannot get away from the reality of a phone or web based debt review service. In this modern age, advances in electronic communication makes it possible to deal with consumers across the world never mind in a nearby town. It has become the norm for many and does not prevent consumers from getting great service if done right. So, the use of a phone or computer to deal with people can’t be the problem.

Access to Debt Counsellors Of the 2500 plus people who have registered as Debt Counsellors most have stopped practicing due to the exponentially growing requirements to run a debt counselling service, ongoing new regulations and the antiquated fee structure forcing DCs to take on more and more clients (and thus having to constantly grow staff). Also these former DCs have commonly said that the business is not a profitable one. At the moment it is estimated that only about 700 DCs are active in SA. +- 280 municipalities in SA. Combine that with the NCR’s quarterly report stats which show that nearly half of all credit users are over- indebted and need debt relief and it highlights the need to empower debt counsellors to deal with consumers...lots of consumers simultaneously.

NCR Announce they have Raided Debt Counselling Firms Things hotted up when the NCR announced in a media press releases that they had “raided” 10 call centre operations in the Western Cape. This then seemed to be part of the recent campaign by the NCR in regard to clamping down on large Debt Counselling firms. Interestingly, these same firms are companies that the NCR has a right to visit in regular monitoring visits without the need for any “raid”. They can visit and ask to se files etc on a regular basis. In fact, the NCR have done so many times in the past and most of the firms visited have extended them great cooperation.

When Credit Providers Were Raided In the past, when the NCR have raided credit providers they have done so along with the police to make arrests. Many arrests have been made each time. This is because the NCR had received specific complaints about abuses that go contrary to the NCA (like taking a consumers ID book or pension card) In the case of the 10 so called “raids” in Cape Town no arrests where made. We may yet see some compliance notices issued... or perhaps the NCR might skip that step and take the firms to the NCT. The NCT can issue big fines or even deregister someone. All things considered perhaps the term ‘raid’ seems to have be miss-phrased. If an illegal activity had been reported then the raids should immediately have revealed this and arrests would have been made as in the case of naughty credit providers up to no good. Some of the firms that were visited said that the visits felt more like a ‘fishing expedition’ with the NCR looking for something, anything against the firms (which weirdly they could have just done in their normal monitoring visits without calling in the police). Others have claimed that the visits to 10 firms hid the NCR’s supposed intent to actually visit only 2 companies with the intent of getting “dirt” on these firms. These firms supposedly may have already been investigated by the NCR with little result and the raids may have been done in an effort to gain access to further info to bolster NCT applications. Possible Reasons For A Raid Sometimes when an NCR Monitor (the people who check up on registrants) goes to visit a Debt Counselling firm they find their appointment ignored or cancelled last minute. The NCR even sent out a strongly worded circular about the topic saying DCs must cooperate or face the NCT. Could it be that these “raided” companies are the firms who have been refusing to cooperate with the NCR monitors when they have tried to visit in the past? This might then be a legitimate cause for concern and perhaps you may need the cops to help force open a door or control an angry registrant. Reports seem to say however that most of the firms visited in the “raids” have been regularly monitored. But even if it was the case (that these were firms who were not cooperating with the NCR ) they could simply have taken these firms to the NCT, after issuing them compliance notices on the topic since being monitored is part of the T&Cs of being a Debt Counsellor. The NCR in subsequent comments to individuals and at industry workshops have branded these “raids” as against specifically call centre operations in the Western Cape. It seems that all the firms visited do have call centre operators (in one form or another) and are were based in the Western Cape. It is true that there are many call centre based operations in Gauteng very close to the NCR headquarters which have not been visited with similar “raids”. So, it does seem to have been a Western Cape thing. One Western Cape DC reports that a staff member was told telephonically by a member of the NCR that it was Cape Town debt counselling firms who were the “problem”.

Complaints Could Lead To Raids It seems that the NCR have received a number of complaints from consumers in the area about their service provider. This means that these matters are clogging up the NCR complaint system. Admittedly the NCR have recently taken on a lot of extra work (which they do not need to and are not really mandated to handle) in trying to resolve complaints instead of just referring them to an appropriate body once they know they are genuine. Whether those complaints they have received are justified or not remains a question to be further investigated. A Numbers Game Sometimes consumers get confused about the services a debt counsellor does or doesnâ&#x20AC;&#x2122;t offer. This is many times the fault of a Debt Counsellor for not having a comprehensive contract with the consumer setting out their offered services. Since call centre operations deal with the majority of consumers under debt review every month, it follows that - based on percentage alone - most consumer complaints will reflect that a call centre operation is involved. It is just a numbers game. If a small DC takes on 10 clients and 10% complain that is 1 client. If a large call centre based DC firm takes on 1200 clients and 10% complain that is 120 people and 120 cases the NCR feel obliged to try resolve. Of course, it might also be that the consumer is not able to recall all they were told when they met with the Debt Counsellor or did not read thoroughly the documentation they received. Often times a consumer might even blame the Debt Counsellor for something a credit provider is doing (rather than blame the credit provider). It seems then that the NCR are not anti use of a phone or any business that uses a call centre. While worried about the number of complaints a firm gets there are also logical reasons why this is not he primary cause for concern on the NCRâ&#x20AC;&#x2122;s part. So what are the Real Issues? In subsequent comments made in response to questions posed by members of the debt counselling community and Debtfree team it has become increasingly clear that a major cause of concern for the NCR is who consumers actually deal with at a call centre and if someone who is not a Debt Counsellor does the work that must be done by a Debt Counsellor only. Also it seems as if many consumers have been contacted by people (who happen to be working at a call centre) offering information about debt review and then after talking to these people later finding out that they are captured on the NCRâ&#x20AC;&#x2122;s data base of people under debt review. In part two of this series we talk to the NCR about these 2 concerns and discuss what a Debt Counsellor and staff members should be doing (in terms of the NCA and regulations). Be sure to catch part two in the July 2016 issue of Debtfree Magazine

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telephone 079 888 7200 email info@bkfaccountants.co.za www.bkfaccountants.co.za

DEBT REVIEW AWARDS

Peer Review Process

The Debt Review Awards is an industry awards program which recognizes excellence in the field of debt review. It seeks to identify which Credit Providers, PDAs and Debt Counselling firms are doing their best in supporting and promoting the debt review industry and process. The firms taking the lead in actively caring for the needs of debt review consumers and their counter points in the industry are identified. Over the last few months the Debt Review Awards process has been steadily underway. Credit Providers, Debt Counsellor associations , PDAs and Attorneys as well as industry experts were consulted in regard to the process and how it could be improved after the 2015 Awards. Thus it was that after some minor adjustments that an enhanced process was launched in April 2016. The awards criteria against which participants were considered was also further refined during the build up to this year’s event. Online Peer Review At the beginning of May 2016 an online Peer Review system was launched to draw information from and about various parties in the industry. Invitations to participate were sent to individual organisations as well as to registrants via their representative bodies. This peer review process enabled NCR registered members of the industry to help evaluate their peers through an easy to use online system. This peer review system differs somewhat to the process used in the past. Previously a panel of industry experts was called upon (by the organisers) to consider the stand out candidates in the industry. Three or four panels of various sizes were asked to consider different parts of the industry and nominate top candidates. The panel members then did research and motivated for winners among the nominees. This took a lot of time and effort on the part of around 30 willing individuals and the results were announced at the Debt Review Awards Gala. This year in an effort to reduce the workload on a few individuals and to increase

the reach of the expertise called upon the peer review process was used. It essentially allowed for an industry wide ‘panel of experts’ rather than a smaller group such has been utilized in the past. By allowing all NCR registered parties to sign up and participate from their own unique viewpoints it also allowed for a diversity of perspectives to be taken into account. NOTE: No participant has been able to rate their own performance or that of their direct competitors. As usual, no members of the public (non registered entities) have been able to participate in the outcome of the industry awards. Over several weeks participants received unique links to review several different companies and individuals at a time. The process recent came to a close with the results being tabulated by the online system. The results and access to the system was then provided to the Auditors (BKF) to confirm the outcomes prior to the announcements. The final results will be announced at the annual Debt Review Awards Gala which will be held in Cape Town this year. The Gala will be attended by Debt Counsellors, Credit Providers, PDAs, Attorneys, Trainers, the media and members of Government (incl the NCR). On the evening the Top 5 companies in various Debt Counsellor categories will be announced and the ultimate winners in the different categories among credit providers and PDAs will receive their golden piggy bank awards.

www.debtreviewawards.co.za

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IN A NUTSHELL

Beach sand, DC applicants and your Business Revenue How are these related?

As a Debt Counsellor you invest a significant amount of advertising to attract new debt review applicants, however despite all your efforts the majority can be like a handful of beach sand quickly slipping through your fingers. Converting applicants into paying clients is not easy. However, the benefit of increasing your conversion rate is substantial. The National Payment Distribution Agency™ (NPDA) defines conversion “as the number of debt review applicants who make their first payment within three months from the date of application.” The revenue of every extra applicant that you convert goes straight to your bottom line, without any increase in operating costs. Here’s a simple example: Joe Counsellor receives approximately twenty applications per month, but only half make their first payment. Assuming the average negotiation fee in his business is R2500 per applicant and after implementing changes to his business, Joe Counsellor converts an extra 20% of his existing applications. Thus, with an increase of only two extra applications per month, his business will make R80 000 additional revenue at the end of the first year. Perhaps you’ve resigned yourself and accepted that poor conversion is a characteristic of the debt review industry. These are after all clients that have made poor financial decisions either by choice or by design, due to unforeseen circumstances. Many factors contribute to the unpredictability of these clients. Debt counselling consumers are often wary of debt review because they lose access to additional credit. The admin burden and documentation required to complete their application are daunting. They fear the social stigma and are afraid to relinquish control. Most don’t understand the benefits of debt review and the relief that it will bring them. Because increasing conversion is not an easy process, DCM in collaboration with the NPDA developed the DCM Business Partnership Programme™ (DCMPP) to help debt counsellors increase their conversion rate. The DCMPP™ involves a series of interventions, triggers and materials that assist Debt Counsellors from the very first consumer encounter, including handholding through the application process, encouraging first payments and reinforcing the benefits of debt review during the full period of rehabilitation. The programme has a proven track record of success, increasing the number of first payments amongst new debt counselling applicants by 20%.

The reality is that across the industry, conversion rates vary dramatically. There are debt counsellors that convert 70% or more of the applications they receive, and there are others whose conversion rates are below 40%. Why do some debt counsellors have far better conversion rates than others? One may argue that debt counsellors with fewer applicants have better conversion rates because they can dedicate more time and effort than debt counsellors with large numbers of applications and telephonic driven operations. However, this is not universally true. There are debt counsellors whose predominant form of debt counselling is telephonic and not face-to-face who happen to have excellent conversion rates. The common denominator with successful debt counsellors is that they have developed special conversion competencies: they screen candidates carefully, make it easy for clients to send documentation, explain the debt review process thoroughly, point out the benefits and ultimately build trust with their applicants. These insights, including knowledge of how over-indebted consumers think and behave, are built into the mechanisms of the DCM Business Partnership programmeâ&#x201E;˘. Applicants that go through a thorough application process are also more likely to pay regularly and less likely to churn.

IN A NUTSHELL is brought you by the DCM Business Partnership Programmeâ&#x201E;˘, designed to support debt counsellors and consumers during the debt review process, in collaboration with the National Payment Distribution Agency (NPDA). For help, contact the NPDA on 0861 628 628. If you have suggestions for topics that you would like covered in future, please email info@dcmgroup.co.za The NPDA was recognised as the industry winner for PAYMENT DISTRIBUTION and Care Premier as the industry winner for DEBT COUNSELLING SOFTWARE at the Debt Review Awards 2015.

Remember when we cried as kids and our parents said: “I’ll give you something to cry about”? We thought they were going to hit us but instead they destroyed the housing market.

DEBT COUNSELLING COMMUNITY SUPPORT DCCS are currently busy with the Winter Warmer project and are currently in need of the following: 1. Warm Cloths -Money contribution or Voucher 2. Blankets - Money contribution or Voucher 3. Food - Money contribution or Voucher 4. Toiletries - Money contribution or Voucher

DEBT COUNSELLING The reason why money orCOMMUNITY a voucher is better/easier is that the families that DCCS are helping, SUPPORT are all over South Africa.

How a deserving family is chosen: Âˇ Any debt counsellor (or credit provider) who wants to get involved in this project will nominate a vulnerable debt review family that really needs a hamper and let DCCS know about the consumers situation. DCCS will then do everything they can to make sure the family receives the Winter Warmer Hamper. Why? Âˇ For many DCs times are tough and budgets are tight as we all know but some of these families really need our help and without it could fall out of the process back into dire financial ruin. Our small donations can make a world of a difference to an entire family. It only takes ONE default to derail the client from the process and it can take ONE hamper to make all the difference

If you want to help or get involved in this project, you can contact: admin@dccsupport.co.za

Debt Counsellors Associations Announcement Board

Upcoming Regional Meeting Dates: Free State Friday 1 July 2016 KZN Friday 26 August 2016 Western Cape Tuesday 26th July 2016 Gauteng Wednesday 26th October

A couple lost both of their houses... because they didnâ&#x20AC;&#x2122;t pay for a photocopier machine. http://www.acts.co.za/news/blog/2016/06/joburgcouple-lose-two-houses-over-photocopier-machine

DCASA Annual Conference The Annual Conference will be held in Gauteng on the 17th of August

www.dcasa.co.za

www.newera.org.za

The BDCF will be attending the Annual Debt Review Awards in Cape Town this month and wish all our members well.

We are holding to meetings (one in Cape Town and one in Bloem) in mid July and all interested parties are welcome to attend. Contact zune@allprodc.org Please see the newsletter in this issue for more details.

To Join the BDCF please email: thandiwe.bdcf@gmail.com

www.bdcf.co.za

www.allprodc.org

JUNE

NEWSLETTER

Non Binding Guidelines As most of our members are aware, a large portion of the debt counselling community are happily following the non binding opinions or guidelines issued by the NCR with little regard to the consequences. For example as per a non binding opinion Debt Counsellors may be changing the end balances of accounts on PDA systems meaning consumers are paying more than ordered by the courts. This is what is legally called Ultra Vires and is in breach of such court orders. Since the NCA is designed with consumer protection and industry regulation in mind we need to ask if we are following the guidelines to the detriment of consumers and in opposition to the purpose of the Act. CIF Feedback AllProDC attended the recent CIF end balance sub com meeting. The opinions of AllProDC in regard to the issue are very different from those of our colleagues who seem to be focused on a quick fix rather than the root cause. AllProDC have now been referred to the CIF NCAA â&#x20AC;&#x201C; Sub Com meeting to discuss the interpretation of Reg 24 . Our position on end balance differences relates to the cause rather than a quick solution. We are saying that the solution can be found right at the start of the process with the point of reference for each account. Essentially the Credit Bureau, PDA and CP systems should all be saying the same thing from the start. In terms of REG 24(1)(B)(ii) we should all be looking at the total balance due. As the process continues we would like to see all 3 systems tracking the updated balance each month. This will also help clarify that the consumer is in no way then in default under the court order and will not reflect as such anywhere on anyoneâ&#x20AC;&#x2122;s system which may be detrimental to the consumers situation and negatively impact on their livelihood. Upcoming Association Meetings Cape Town Meeting: 18th July 2016 - RSVP to zune@allprodc.org Bloemfontein Meeting: 18th July 2016 - RSVP to zune@allprodc.org All are welcome regardless of association (or non association). Hot New Facebook Topics You Should Comment On: Several new hot topics are being discussed at present on the closed AllProDC members Facebook page including: The interpretation of settlement value and total balance. We are looking in depth at the Norris court case judgement. Since the Act does not make specific provision for a DC to mess around with interest rates (rather just term and monthly payment amount) it seems that there may be underlying issues with the judgement. We feel that the NCR need to ask for a Declaratory Order in terms of NCA Section 16 to gain full clarity on several vital issues. We are even looking at the status of this judgment and asking is it a true declaratory judgment in terms of the NCA. Members are welcome to weigh in on the topics and contribute to the hot debate around all these points. To join mail: zune@ allprodc.org Debt Review Awards With the Awards just a few days out we wish all our members and DC colleagues from the other associations (and non associated) well. We hope that those hard working credit providers out there who we enjoy working with also get the recognition they deserve.

www.allprodc.org

FACEBOOK: www.facebook.com/AllProDC / TWITTER: www.twitter.com/AllProDC

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