Debtfree DIGI November 2016 by Debtfree Magazine

South Africaâ&#x20AC;&#x2122;s debt counselling magazine

DEBT REVIEW SUCCESS THE SECRET INGREDIENT November 2016 www.debtfreedigi.co.za

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EDITOR’S NOTE So, Americans have voted and chosen their next President. The results were close, as always, even though the vast majority of Americans didn’t bother to vote. Though Mr. Trump took the vote at the end of the day based on the weird American state voting process, the numbers separating winner from loser were marginal compared to the amount of citizens involved. As has become typical in democratic countries, after the election results were in passionate people all over the country whose candidate didn’t win began to complain and protest. Basically the vote showed that half the voters hate the next president while over 6 times that number of people didn’t even bother to go and vote. Their disillusionment and disinterest was palpable. As the World Power what happens in America influences everyone. The US is in a tough spot with the debt being run up during the previous administration equal to that of every single administration before it added together since America was formed. The Rand reacted to the US elections as well as local political events with interesting fluctuations as

the world tried to figure out what now? People hate being unsure. Even in debt review that is the case. What happens if you get a call saying your debt review is not working? What if the person telling you this says they are calling from a creditor you have done business with for years? We consider this and other scenarios in this month’s magazine as we consider: is their a secret to making debt review work? We also look at local industry news, court cases and advice. All of which will help you know more and thus be better armed for situations that develop while you are under debt review or dealing with debt. If you are under debt review then passion is needed. Disinterest and disillusionment will not serve you well. Many of those entering the process don’t see it through and fail to take advantage of the process to improve their lives. We hope that, with the holidays in sight, you stay on track, keep those payments going and very importantly that you remain passionate about becoming debt free. Besides if ‘the Donald’ can become PresidentHey, anything is possible! Zak King

CONTENTS SECRET INGREDIENT

WHEN CREDIT PROVIDERS CALL

PAYMENT PROBLEMS

INDUSTRY NEWS

SERVICE DIRECTORY

DID YOU

A SUCCESSFUL DEBT REVIEWâ&#x20AC;&#x2122;S SECRET INGREDIENT

KNOW THAT DEBT REVIEW ALSO HAS A SECRET INGREDIENT?

For many decades people around the world have got to enjoy the delicious finger licking taste of Kentucky Fried Chicken and down a refreshing glass of cool bubbly Coca Cola. While the health benefits or over indulging in either are up for debate the two products have something in common. A secret. Yes KFC has marketed themselves as using secret herbs and spices and Coke has been able to keep it’s stranglehold on the Cola market with their unique receipt known only to a select few individuals world wide. Did you know that debt review also has a secret ingredient? It does. Now you may wonder is it a secret computer programme that does all the work? Or maybe it is a ‘special way’ to repay the debts over time to get the most benefit? Perhaps the secret lies in how the matter is set before a court of law? The secret is none of these things. It is a lot simpler than that and yet at the same time something far more fundamental to success. Here is the secret: Good communication between consumer and Debt Counsellor. That may sound simplistic but it is very true. A failure to talk to one another often leads to the total failure of the entire debt restructuring process. In many cases, the entire debt review can be undone in one foul swoop, after years and years of loyally paying, as a result of not talking to one another.

TALK TO YOUR DEBT COUNSELLOR Debt is just one of those things we don’t like to talk about. Socially it is a bit of a “no, no” unless you are chatting with your very closest friends or family. Even within families many husbands and wives struggle to communicate about their debts and often try ignore the topic rather than deal with it directly. The truth is; we just don’t like to think about debt and we don’t like to talk about debt.

What then if we face the situation where our debt has gotten out of control and we are forced to turn to a professional for assistance? Suddenly we have to expose this secret side of our lives to a relative stranger. Crucially, one of the most common factors leading to the failure of a debt review is a lack of communication between the consumer and the Debt Counsellor. This is not to say you must be on the phone to your debt counsellor every day about every matter in your life. Hardly. Then neither you nor your Debt Counsellor would get any work done. Rather it is about not making any critical decisions regarding your lifestyle or major living expenses or your debts without taking the time to consult with the person who is helping you with these matters. Every month consumers pay a small amount in after care fees to their Debt Counsellor. This enables the Debt Counsellor to cover costs related to the persons debt review on an ongoing basis. It seems logical then that a consumer who is paying for something would make use of that service. Strangely in debt review this is often not the case. When unusual circumstances arise often consumers will hit the internet looking for info rather than pick up the phone and chat with their Debt Counsellor. Consumers who are having issues with the service they are getting will talk to strangers about the matter rather than call the debt review firm and talk to them about solutions. When consumers receive conflicting information from credit providers or collections agents they neglect to talk to the person who they are paying to help them deal with just such a situation. Because many consumers fail to talk to their Debt Counsellor they make decisions that are either recommended to them by a collections agent or by family and friends. While on the surface such choices may seem logical they can have far reaching and sometimes disastrous results. In our following article we will look at a few such situations.

WHEN CREDIT PROVIDERS CALL

When a consumer enters debt review it is normally the case that they have been hounded for a while through the normal collections process that most credit providers have in place to try pressure consumers into paying. It can be exhausting and those collections teams can be aggressive and scary. Fortunately one of the benefits of entering debt review is the sudden reduction in collections pressure. Once the debt review status starts to filter down through the various credit providers systems the calls start to dry up and the stress of avoiding ‘private number’ calls eases. This doesn’t happen over night but it is a relief to be able to tell any collections person who calls that you are under debt review and they can “talk to my Debt Counsellor”. Most consumers assume that credit providers are super organised and that their computers never get anything wrong. This sadly is just not the case. Many times those under debt review will still get some calls and demands for payment even after several weeks or months. This can plant a kernel of doubt in a consumers mind. Is the debt review actually working? they wonder. Then comes a collections call which makes you super worried. You get a call from someone saying: “I am from Credit Provider x. I want to make an arrangement for you to pay your debts”. “But I am under debt review” you reply to the stranger on the line who you just assume is from the credit provider. “Well, we are not seeing any payments from the Debt Counsellor” they reply.

“In fact, my system shows your debt review is cancelled” they continue. Then comes the pitch: “The good news is I can make a special arrangement for you to pay your debt at a better rate than under the debt review”.

LET’S CONSIDER WHAT JUST HAPPENED: (1) I am from Credit Provider X - basically this is a lie at worst or an exaggeration at best. They are from an outsourced company somewhere. Why do you trust this stranger on a phone you have never met? Beware! (2) we are not seeing any payments from the Debt Counsellor- this shows an ignorance of the process. The payments come from a Payment Distribution Agency or you directly. Not the Debt Counsellor. They don’t handle the money. (3) your debt review is cancelled - Lie! Debt review is done at court. It is a court order. Did you get any new court papers which you had a chance to go fight about? No. (4) The good news is I can make a special arrangement for you to pay your debt at a better rate than under the debt review - here it is. The person on the phone wants to either trick you into paying money into their bank account or making an arrangement that earns them commission. This really undermines the validity of what they are saying. Beware! Sadly many consumers hear the name of a credit provider they know and simply assume that the stranger on the line has all the facts. This is probably not true however many consumers then instead of simply picking up the phone and talking to their Debt Counsellor about the call stop paying the correct amount to the PDA (or stop paying entirely). Since the debt review is dependent on regular uninterrupted payments this wrecks the persons debt review.

WHEN YOU HAVE EXTRA FUNDS

Your long lost, great uncle, three times removed dies and leaves you some cash or you pick up a winning lotto ticket on the sidewalk or your boss goes mad and gives you a sudden raise (hey, it could happen). You now have extra funds to use to help settle your debt which is under debt review. Maybe not all of your debts but certainly a few extra rand to put into the process somewhere. So, what to do?

Many consumers head off to one of their credit providers branches and make a payment. In some cases, they are even able to settle the full outstanding amount which the credit providerâ&#x20AC;&#x2122;s staff member gives them at the branch. Feeling very happy with themselves they head home to celebrate one more step towards financial freedom. Then at the end of the month they notice that the PDA (the NCR registered companies who handle the money side of debt review) have taken part of their payment and given it to the same credit provider. The consumer gets upset. Why would they do that? The debt is settled. It is usually at this point that the consumer calls the Debt Counsellor to complain. The situation then takes a lot of calls, emails, reconciliations and even the occasional fight to get sorted out. It turns out the consumer over paid the account with the extra funds and the credit provider had extra money sitting in their account which should have gone to the consumers other debts. Many hours of additional work and effort are required in the wake of this seemingly good deed. What went wrong? What should have happened is that the consumer should have contacted their Debt Counsellor and discussed the best way to use the funds. Often times consumers do not realise that credit providers accounting needs to be adjusted during the process to account for the debt restructuring court order and accepted agreements between the creditor and Debt Counsellor. This may not accurately feature on the branches statements. This can mean that the balance given by the branch may be a lot higher than it actually is under debt review. A Debt Counsellor can check this out before authorising any extra payments. The debt Counsellor can also tell the PDA to adjust payments when a credit provider is paid up so no extra funds are over paid to them. In many cases, where extra funds regularly become available, the fair thing to do is split them among all creditors. Though this may have less of a visible effect, at first, it can save a huge amount in interest over time. Your Debt Counsellor can figure that out for you. The key to making successful use of extra funds is to talk to your Debt Counsellor and plan the best use of those funds together - preferably via your PDA.

THINKING OF LEAVING THE PROCESS?

Debt Counselling is one of those strange businesses where you want to get rid of your clients. It sounds strange but all Debt Counsellors want to help their clients rehabilitate and get out of debt. Once out of Debt they no longer need their services. You may think that is then little motivation for the Debt Counsellor to do a good job but all Debt Counsellors will tell you that happy , satisfied clients will bring you more clients through referrals. For many consumers the watershed of their journey through debt review comes at 36 months. For a long time they have paid regularly and either one of two things happen: (1) Their situation improves due to extra income or (2) they begin to grow frustrated with the seemingly slow progress being made on paying off their debt. Getting regular extra income and thus the ability to not need debt review is a great situation. It promises the chance for things to once again return to normal and even potentially for you to access credit again. When some clients reach this stage they simply stop paying via the PDA and begin repaying their creditors. They may make this decision suddenly close to the end of the month and in many cases donâ&#x20AC;&#x2122;t consult with their Debt Counsellor. Many consumers have learnt the hard way what a mistake this rushed approach is. Some have lost cars and even homes due to the technicalities of original contract obligations vs debt review restructured payments. Without going into too much detail, if you have assets (like a car or house) you should work with your Debt Counsellor to make sure that the amount you owe when you leave debt review is the same as what you would have owed the creditor had you never entered debt review at all. If you leave suddenly and the creditor demands large amounts in arrears you could lose your assets and going back to the Debt Counsellor will seldom help at that point. Good communication and planning along with your Debt Counsellor will help in the weeks it takes to make sure all credit providers are on the same page as you

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when you are ready to leave the debt review process half way through because you no longer need it. Due to the way interest and cascading payments work debt is often settled fastest at the end of the process. The last few months can be a delight watching the balances fall. It is like suddenly cycling over the top of a long hill onto a steep downhill to financial freedom. The hard part is the uphill. This is sadly where many consumers give up because they donâ&#x20AC;&#x2122;t talk to their Debt Counsellor about their frustrations and concerns. To them it may appear that little is being accomplished. We all like to see progress and under debt review the progress is slow and steady for a long while. Most debt review plans are for a 5 year period. This is not actually long to pay off debt. Especially is that true if you have a car. For those facing the frustration of slow progress, chat with your Debt Counsellor. Ask them what would happen if you were to be able to pay a few rand more every month. Ask them to make sure that the credit providers adjust the statements they may be sending you with bogus figures on them. Remember Credit Providers systems need to be tweaked to show the right figures (donâ&#x20AC;&#x2122;t believe everything you read). For those clients who simply stop paying because they see little progress things are much worse than they imagine. Leaving the process causes the credit providers to ignore all their hard work and payment over all the time during debt review meaning they will be deeper in debt than ever. Many consumers who make this mistake desperately try to get back into debt review with little or no success. The damage is done. So, if you are thinking of leaving debt review, talk to your Debt Counsellor and make good plans and understand your debt situation fully before making any sudden changes.

PAYMENT PROBLEM?

Debt review is done via the courts and your debt restructuring court order will require that you pay every single month, no matter what, if you want to benefit from the process. Your Debt Counsellor will help you create a realistic budget which allows for saving funds toward some annual expenses. Sometimes however, an unplanned situation can suddenly arise which impacts on your ability to make your monthly repayment. Talking to your Debt Counsellor can help even in this difficult situation. LOSING YOUR JOB A factor which effects your ability to repay is, of course, your income. Suddenly being retrenched can throw a spanner in the work and create a lot of stress. Even more so when you are under debt review. Many consumers take out insurance on their ability to make debt review repayments so that if they lose their jobs (for instance) their insurance will make the debt repayments for up to 9 months, in some cases. Good planning with your Debt Counsellor up front can help protect you later. If you get the bad news chat to your Debt Counsellor at once and they will contact your creditors and see if they may be willing to make short term concessions (they don’t have to and the DC can’t force them to) for you. Credit providers know you don’t want to lose your job. They understand that. It is not like you are just taking a holiday and spending your debt repayment amount. This is a genuine unplanned situation. SUDDEN MEDICAL EXPENSES Just as your credit providers may be willing to extend you a short period of concession so to they may do so in the case of a serious medical expense which is

unplanned. They don’t have to but your Debt Counsellor can ask them or even take the matter to court again to vary your court order. The sooner the Debt Counsellor talks to the credit providers the better. So, do not leave things till after the end of the month when you should have made your payment already to let them know. There will still be financial ramifications but talking to your Debt Counsellor can help mitigate some of the worst effects.

IF SOMETHING SUDDENLY HAPPENS AND IMPACTS ON YOUR ABILITY TO PAY THEN YOU NEED TO TALK TO YOUR DEBT COUNSELLOR STRAIGHT AWAY.

MINIMISING THE FALL OUT If you miss a payment it is realistic to realise that some credit providers will probably start their normal collections process again and even try go get a court order or judgement against you. You had an arrangement, even a court order and broke it. Even if the situation is unavoidable they have this right. Though the Debt Counsellor is not their boss and can’t force any credit provider to cooperate, they may be able to adjust the rest of your debt review with the other creditors who are still happy to be part of the process (even though you missed a payment). This means that though your life will get more difficult some of the process might still be saved making things better than falling right out of the process totally. If something suddenly happens and impacts on your ability to pay then you need to talk to your Debt Counsellor straight away. Don’t wait till the end of the month. Call them up or go into their office as soon as you can to make a plan. They want to help you. They will not be angry. They will try to help reduce the fall out.

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NEW BILL SETS OUT STANDARD FOR GARNISHEE ORDERS

debtor’s combined ‘garnishee’ orders should not exceed 25% of their basic salary. It is hoped that should the Bill It has been announced that an updated become law this will help reduce abuses and hopefully improved version of of the process. the Courts of Law Amendment Bill is likely to be adopted by the National Assembly’s Justice and Correctional SA’S FAVOURITE Services Committee soon. The new Bill DEBT COUNSELLOR proposes that there will be prescribed Debt Counsellors, Credit Providers and factors to be considered when a court PDAs are signing up to be considered is asked for an emolument attachment for the prestigious title of SA’s Favourite. order (or garnishee Order as most During November industry parties will people call it). These will help determine be able to sign up onto the online system if the EAO would be just and equitable, and capture their details. Then during or grossly disproportionate. Factors December and January consumers will that courts will be asked to take into be invited by these firms to cast their account are things like the size of the votes for their favourite service providers. debt; the circumstances in which it Companies will compete for these arose; the debtor’s monthly income; popularity votes in their relative size and the amount needed for the debtor to area categories. Smaller firms will be meet necessary expenses and honour compared with smaller firms while the other commitments in respect of his/ biggest will try to ask their many clients her dependants; the rights and needs of to vote for them via the online system. affected children and other vulnerable This will allow for a accurate comparison persons; the interests of the plaintiff; and eliminate any larger firms with more alternative debt recovery measures; clients just out numbering smaller firms. and the implications of social values. Voters will go online following links There might also be a provision that the provided to the participating firms and

NEWS CONTINUED

be able to show that they appreciate the service they receive. The voting process is quick and easy. The question is can companies convince their very busy clients to take the time to follow a link and vote for them? If their clients love them and appreciate their service then they are likely to do so. Debt Counsellors, PDAs and CPâ&#x20AC;&#x2122;s will be free to invite their clients to cast a vote for them (as long as they do not incentivize voting) during these two months. After the results are tabulated an announcement will be made in Debtfree magazine and on the Debt Review Awards website.

PARLIAMENT DISCUSS DEBT FORGIVENESS

For many years, government has been looking at other possible debt forgiveness processes which may help bring relief to the countries poor. The topic was discussed at Parliament again recently. Various interested parties made suggestions for consideration. While some parties supported the idea the banks came out strongly against any process which would see some consumers not have to pay back money they had borrowed and already spent. Mr. Cas Coovadia of the Banking Association of South Africa (BASA) told the portfolio committee that the BASA do not support the principle of debt

forgiveness. This is primarily because the banking system is built on the principle of paying back what you borrow. Any change to this system would lead to severe consequences for the industry and economy. Debt forgiveness would impact on others who paid regularly and on time. Such programs would eventually make borrowing funds almost impossible for consumers, as the bank would have to avoid absolutely all risk of possible non payment. Since half the country repay their debt in a delayed or spotty way this would cut access to credit for millions of people and ultimately could crash the economy. BASA were proud of their participation in the debt review process which they firmly support and encourage more consumers to use. Mr Paul slot of the Debt Counsellors Association of South Africa (DCASA) spoke about ways to try reduce the cost of dealing with debt. He mentioned that most over indebted people try to deal with debt by taking on more debt. Most consumers donâ&#x20AC;&#x2122;t look for help while only 5% of troubled consumers have done so. He proposed rewarding consumers for good repayment habits with discounts rather than writing off debt entirely. One of the main points of his presentation was the idea that if debt review could be done without the need to take the matter to court (and pay attorneys)

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then costs could be cut for consumers. Though a process like this was tried in the past (called VDM) the NCR shut it down as unlawful, particularly in line of their declaratory order of 2009 regarding debt review. Cosatu on the other hand proposed a program of debt cancellation particularly for those perhaps unemployed, on social grant recipients, student or just very poor. They did not define how to determine who would qualify and who would determine this. One area of concern that they made mention of was the granting of reckless credit. This is something that can already be addressed by the NCT and the courts and through debt review but is very difficult to prove at court and often costs a lot of money and time to do so (due to the banks fighting against such matters with all their might). Cosatu proposed several options such as debt write offs, credit term extension or perhaps interest rate reductions for troubled consumers.

and how many people have finished the debt counselling process.

NEDBANK MEET WITH DEBT COUNSELLORS

Nedbank held their latest meetings with Debt Counsellors in the Cape Town area this month. The meeting which is branded as a chance to have some candid conversations discussed areas where Debt Counsellors think Nedbank are doing well in regard to Debt review. Also discussed were areas where Nedbank can improve. The intimate meetings resulted in a good exchange of information and ideas.

DCASA AGM

The Debt Counsellors Association of South Africa met in Gauteng during November to review their financials (in good standing) and to elect the 2017 National Executive Committee. For an association to have legal standing it needs to hold an annual general meeting DEBT COUNSELLORS SUBMIT (AGM) to organise the association. The QUARTERLY REPORTS votes came in and the same willing Debt Counsellors submitted their volunteers as in 2016 will serve on the quarterly reports on their statistics to NEC again in 2017. the NCR for the period 1 July 2016 till 30 September 2016 midmonth November. The NCR use these stats to compile their reports on who is getting help with debt

LOAN SHARKS LAST CHANCE TO REGISTER AS CREDIT PROVIDERS

Six months ago new regulations came out which require everyone offering credit to register as credit providers with the NCR by November. The NCR thus need to register them, issue them certificates, demand reports and monitor their activity. Though there was no mad rush to do so the NCR hope to use the new requirements to prosecute small illegal loan sharks who charge high interest rates and make illegal demands on consumers. If you ever lend people money and charge a fee or charge them interest then you are a credit provider and should have registered. Those lending money without registering can find that consumers do not have to repay them since the loan was illegal.

ABSA SUMMARY JUDGMENT THROWN OUT OVER MISSING PAPERS

When ABSA lost their original documents to a Cape Town consumer’s bond they did not realise what an issue it would become when he later stopped paying. After ABSA failed to inform the consumer if they had securitised his bond the consumer grew upset and stopped paying. ABSA then took legal action and tried to apply for a summary

judgment against the consumer. The application was recently thrown out of court due to the bank’s lack of original documentation which they say was lost in a fire. . Though the bank wanted to present papers that it felt would be similar to those that existed before, the court was not convinced. This case is one of many similar matters recently. Cases like Absa Bank Ltd v Le Roux or ABSA Bank v Hanekom and Absa Bank Ltd v Future Indefinite Investments 201 (Pty) Ltd and Ors have begun undermining the banks efforts to obtain summary judgments based on recreated papers. The November 2016 Kevin Radford v ABSA case regarding securitisation and proving that the Docufile fire actually happened is one of the most anticipated cases of the year. The bank will finally get to prove whether the fire happened and why they have not registered the required changes at the deeds office. don’t be a twit

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IN A NUTSHELL

MONEY MATTERS ARE A WOMAN’S CONCERN

Many women hand over the responsibility for money matters to their husbands. It is said that ‘ignorance is bliss’, but when it comes to your family’s financial situation this approach can be disastrous. Talking to your partner about money can be awkward, but there are some things that you need to consider.

YOUR MARRIAGE CONTRACT Depending on your marriage contract, you may be jointly responsible for your partner’s debt. Community of property is the default marriage contract in South Africa unless you sign an antenuptial contract. If you are married in community of property then all your assets and debt are part of a joint estate. If your partner incurs debt without your knowledge, you are jointly responsible for this debt by law. If you have an antenuptial contract (ANC) you will have a measure of protection against your spouse’s debt. Make sure you understand the implications of your marriage contract. BUDGET TOGETHER Without a budget that includes planning around joint income, expenses, debts and savings couples lose track of where their money is going. Statistics released by the South African Reserve Bank show that at the end of December 2015, the ratio of household debt to disposable income had increased to 77,8 percent. This means that for every R100 earned, R78 is going to pay off debts. If both partners have a better understanding of expenditure then you may each be a little more cautious when making purchasing and financial decisions. Here are some examples: 1. One person is paying off debt at 30 percent interest, whilst the other has money invested in a savings plan earning 8 percent interest. Ideally as a team aim to settle the most expensive debt first and then start saving. 2. Women are often responsible for buying food for the household. According to Statistics South Africa, food inflation went up by 11.6 percent in September 2016 compared to the same period last year. This is often a contentious point for families as women feel the pinch in their ‘budget’. Transparency, discussion and making compromises will alleviate this pressure. 3. Have an emergency fund that can cover the equivalent income of one partner for a period of three months, should something like illness or retrenchment catch you unawares.

4. Beware of ego trappings and be practical about major expenses like homes and cars. Don’t take on huge debts so that you can show off to family and friends. If this debt cannot be serviced in the future you could land up in a position where you become over-indebted. RISK AND DISABILITY COVER Life can take unexpected turns. Risk and disability cover are particularly important if you have children together or are dependent on your partner’s income. DON’T HIDE DEBT FROM YOUR SPOUSE Don’t hide the fact that you are falling behind on your debt repayments from your spouse. Alerting your partner to this early means you can address the problem before it becomes overwhelming. There are a number of things to keep in mind if you find you are struggling to repay your debt: 1. Contact your Credit Providers and re-negotiate the repayment terms 2. Don’t just stop making payments. Your creditors can obtain judgments to take back assets like your house and car. 3. Don’t take out extra debt to pay off existing debt. This just escalates the problem. Money matters concern both partners in a marriage. responsibility as a woman.

Don’t relinquish your

IN A NUTSHELL is brought you by the DCM Business Partnership Programme™, 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 Debt Review Awards Winner 2014 and 2015: NPDA: Payment Distribution; Client & Customer Service; Industry Support & Engagement Care Premier: Debt Counselling Software

NCR MONITORING The National Credit Regulator (NCR) have a duty to check on the different entities registered with them. This includes Payment Distribution Agencies; who hand debt review consumers money, Credit Providers; who offer credit to consumers and Debt Counsellors; who advise consumers and assist the courts with debt restructuring plans. The NCR might ask for some information electronically or they may visit the registrants office in person and ask to see some files. The NCR also check to see that the registrants facilities are up to standard and that they display the necessary certificates and signage.

“ It always seems impossible

until it is done”

- Nelson Mandela

Specialist Attorneys dealing with Debt Review matters Magistrates Court and High Court Matters TEL 021 913 2514 FAX 0866070940 EMAIL info@liddles.co.za PHYSICAL ADDRESS 7 Chenin Blanc Street, Oude Westhof POSTAL ADDRESS PO Box 3407, Tygervalley, 7536

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VDMS A number of years ago some credit providers, Debt Counsellors and PDAs worked on a way to do debt review without the matter having to go to court. It was hoped this would save consumers money while still offering them debt relief. This Voluntary Debt Mediation programme was shut down by the NCR because it did not provide legal protection for consumers. There were also concerns about credit providers providing leads to Debt Counsellors and the lack of investigation into possible reckless credit.

DCRS A piece of computer software, designed by the banks, which suggests how to pay off debt between all credit providers. The software prioritises secured debt (houses and cars) and reduces interest rates and fees to help make paying easier. This system is designed so that credit providers do not have to double check each proposal. If a proposal is made via the system credit providers can and by agreement must automatically accept the repayment plan. Debt Counsellors can use this way of working out how to repay debt to get consumers certain extra benefits over and above what the law demands of credit providers.

All professionals have professional indemnity if the unforeseen happens. Do you as a professional Debt Counselor have professional indemnity as stipulated by the ethical code?

086 111 2882 TELEPHONE 0861 112 882 FACSIMILE 086 605 9751 MOBILE 082 449 6856 EMAIL andre@in2insurance.co.za

www.in2insurance.co.za

MELIORLEAF WONâ&#x20AC;&#x2122;T LOAD YOUR PREMIUMS OR REPUDIATE A LEGITIMATE CLAIM Specialist insurance for people in debt review. Ask your debt counsellor.

CALL US NOW 0861 635 467 www.meliorleaf.co.za

THE NCR WANT TO REGULATE LEGAL FEES

The NCR are concerned that some Debt Counselling companies are using the money that consumers pay towards legal fees for non legal fee expenses (like paying staff and paying rent). In an effort to get some companies to stop abusing these fees, they are now trying to find inventive ways to curb this behaviour. The challenge is that some of the NCRâ&#x20AC;&#x2122;s proposals are simply impractical. Since legal fees are not mentioned in the National Credit Act in the section on debt review and since the DTI have never issued any fee regulations this area is (like the Debt Counsellor fees) a grey area. Since there is no regulation the NCR is unable to regulate and enforce any regulations. The originators of the NCA did not expect all matters to have to go to court and only added it as a provision if credit providers started fighting the process. They envisioned matters being resolved voluntarily in most cases. That all changed in 2009 when a declaratory order, which the NCR were involved in, required that all debt review matters must go to court or the NCT at some, unspecified, point during the debt review. Mostly, this is done up front to prevent any other legal action on the matter creeping in causing extra works and costs. Attorneys are governed by their respective Law Societies and not the NCA or the National Credit Regulator. Despite this the NCR have been trying to dictate to attorneys in an effort to reduce the abuses of â&#x20AC;&#x2DC;legal feesâ&#x20AC;&#x2122;. The latest effort was a circular proposing that attorneys only be paid if a consumers matter went to court and the court order was granted.

The circular also suggested that the fees would only be paid after the matter is concluded. Of course, since debt review legal matters can go on for a long time this creates a problem. Attorneys want to receive funds into their trust account before working on matters. Also legal action can result at any point during the average 5 years of debt review. The NCR would like the attorneys to wait for their money. This wont work. The NCR circular also proposed that each attorney quote on legal work. Though this is a logical extension of the Consumer Protection Act, in practice, this simply never happens. The matter will no doubt spark further discussion and debate. At a recent debt counsellors event, the question was posed to those attending: “What is the biggest challenge facing the debt review industry at present?” The answer was somewhat telling, as several Debt Counsellors replied: “The NCR”. They went on to discuss the recent statements and demand emanating from the Regulator that they felt were impractical, anti-competitive or illegal. There was a general feeling that the NCR are unaware of the day to day realities of the process. Another challenge the recent proposal raised was that the NCR did not make mention of the NCT process. Many Debt Counsellor use this process for qualifying consumers. It is cheaper than going via the Magistrates Courts. Whether the omission is as a result of the recent falling out between the two parties (when the NCR threw them under the bus at Parliament and tried to take their job) or not is unclear. Maybe it was simply a massive oversight that needs to be addressed. The NCR and reputable Debt Counsellors (and their associations) want to ensure consumer’s funds are used the best way possible and the industry will continue to look for ways to reduce abuses and clear out any practitioners who are acting illegally. This matter however may lie outside of the NCR’s jurisdiction and firmly in the hands of the various law societies to try regulate.

THE NCR & DCRS

The National Credit Regulator is a body created in terms of the National Credit Act (NCA) to register and regulate credit providers, Debt Counsellors, Payment Distribution Agencies and alternative dispute resolution agents (they help when you are arguing with someone). The NCR are tasked with educating consumers about their credit rights as well as monitoring and statistical reporting on the credit industry (incl debt review). Many years ago when debt review was young the NCR wanted to help smooth things over when debt review was experiencing some opposition from credit providers who had, in their defence- just had the as yet, little defined, process shoved down their throats. The NCR formed a Task Team who made various suggestions on ways debt review could be done over and above the NCA. Part of the Task Teams findings were some possible guides which credit providers and Debt Counsellors could use to evaluate and restructure debt (well, in reality a court restructures the debt as it sees fit so maybe propose to restructure debt is a better phrase). Several of the big banks agreed on some concessions they were willing to make and began encouraging the smaller credit providers to go along with these rules. Large credit providers at the time even funded an organisation which was punted as an alternative to debt review (it was debt review but without a Debt Counsellor or the courts) which used similar rules to what the NCR Task Team had proposed. Later when things became a lot more sophisticated and Payment Distribution Agencies had begun to offer nice software to Debt Counsellors to use to help plan debt restructuring the big credit providers began to see how they could speed things up their side. It was around this point when they realised that if they could get everyone to try work out debt review repayments in the same way and automate a lot of the process it would save time and money.

LARGE CREDIT PROVIDERS AT THE TIME EVEN FUNDED AN ORGANISATION WHICH WAS PUNTED AS AN ALTERNATIVE TO DEBT REVIEW (IT WAS DEBT REVIEW BUT WITHOUT A DEBT COUNSELLOR OR THE COURTS) WHICH USED SIMILAR RULES TO WHAT THE NCR TASK TEAM HAD PROPOSED.

A set of “rules” were programmed into a system which Debt Counsellors were asked by credit providers to give a try. This was called DCRS. The system is not a cheap one reportedly costing around R5million to maintain each year. The big banks covered most of those costs. They hoped to see a saving of a similar or greater value as all Debt Counsellor began to use this way to work out debt repayment plans. Many firms began to use the system and found it to speed things along. More and more smaller credit providers agreed to use the system even though their credit often was then paid back at zero %. Then came the snags. They system was by no means problem free and bugs and glitches came and went causing some to stop using the system out of frustration but as time went by many Debt Counsellors made use of the system. Some who saw the similarities to the old alternative to debt review rules built into the system were not eager to use a system designed by the banks. If it came from and was paid for by the banks then could they rely on the system to benefit consumers equally? In deed some aspects of the NCA (like reckless credit and Section 103(5) were not built into the system) At the same time the system and rules got caught in a major battle involving something called VDMS which was eventually shut down by the NCR under pressure from some in the industry. This hurt the systems reputation.

Between the lack of promotion, the VDMS issue and providence of the program usage stagnated. Though the larger Debt Counsellors were eager to use the system many smaller Debt Counsellors just ignored it. Indeed the dreaded 999 errors drove many from using it. So though there was now a nice system which the banks preferred to plan debt restructuring there were still lots of Debt Counsellors sending in proposals worked out in other ways using software from other parties (like the PDAs) or a calculator. Credit providers themselves also found they could not just trust the DCRS system to produce the right results each time and had to still pay staff to check the proposals generated rather than letting the system accept the proposals automatically. So, the point of the system (saving time and energy and money) was slowly seemingly mooted.

EVENTUALLY SOME OF THE BIGGEST FIRMS CARRYING THE COST STARTED TO WARN THAT THEY WERE TIRED OF DOING SO IF PEOPLE WERE NOT ALL GOING TO USE THE SYSTEM.

All the while the bills for DCRS had to be paid. More bills but limited usage. Eventually some of the biggest firms carrying the cost started to warn that they were tired of doing so if people were not all going to use the system. Eventually some even stopped paying and diverted funds elsewhere. The NCR like the idea of uniformity though and have for a long time being promoting the use of the system for some reason. Recently they supposedly even planned to use funds they received from the interest portions of PDA fees to help cover the cost of this software. They mentioned that they would potentially take over management of the software. At the moment the NCR manage some software called NCR Debt Help which is used to track consumers progress through the debt review process. There have been many issues with this software over time.

Recently the NCR asked Debt Counsellors to send certain notifications to credit bureaus during the process which their system is automatically meant to do. It seems even they have concerns about itâ&#x20AC;&#x2122;s effectiveness. The other day the NCR, in a seemingly secretive way, asked a selection of Debt Counsellors for comment on DCRS and their plan to try make use of the system obligatory for Debt Counsellors by adding it into the DC terms and conditions of registration. This caused something of a stir. Some Debt Counsellor felt left out of the comment phase which caused them to be disappointed or even angry. To others the idea of the NCR forcing them to use a particular piece of software, over another, is very strange and concerning. They worry about both their and their clients rights. Could the situation develop where the NCR, who are meant to regulate the industry based off the wording of the NCA and regulations, manage a piece of software that they force Debt Counsellors to use based on guidelines that they write? Could DCRS become obligatory and not infringe on consumers rights without massive changes? It must be noted that not all cases for debt review can possibly work on the system. Some can but others simply do not work out within the time periods or amounts that the credit providers would prefer. Some Debt Counsellors are now concerned that the NCR might next tell them what brand of computers to buy, might tell them to begin using Linux as their operating systems or to buy iPhones as opposed to another brand. Those not conforming would then potentially face censure for not doing so. It is a potentially scary dictatorial picture which is presented. Those Debt Counsellors who, despite recent issues surrounding vehicle finance, regularly make use of DCRS find it to still be a very useful tool which helps speed up the process and obtain some nice concessions for many of their consumers. The question is will the NCRâ&#x20AC;&#x2122;s possible plan to force the industry to use the system actually backfire and cause pushback litigation and protest to the point where the system sadly has to be abandoned entirely?

DEBT COUNSELLORS ASSOCIATIONS ANNOUNCEMENT BOARD

THE 2017 DCASA NEC MEMBERS ARE:

ABSA Hammered At Court

Paul Slot Eugene Cilliers Gerhard Stoltz Â Russell Dickerson Tony Richards Mauritz van den Heever

Lawyers who represent the banks usually waltz into Court and show any old agreement to the Judge. For once, this has not happened.

We wish them all the best and thank them for their willingness and efforts.

www.dcasa.co.za

As an racially diverse association we promote both debt counselling and consumer education as well as B-BBEE for our industry. For more info about joining the BDCF please visit our webpage.

www.bdcf.co.za

This is a great story: http://www.acts.co.za/news/blog/2016/10/ knockout-blow-for-absa-in-cape-high-court-oversecuritisation-accusation

www.newera.org.za

W Cape members will be meeting soon in December before most firms shut down for a short end of year break. For more details on where, when and what time please email: finance@allprodc.org All are welcome (no attendance fees).

www.allprodc.org

NOVEMBER

NEWSLETTER DCRS The NCR recently distributed communication to a select group of Debt Counsellors asking for their input on the NCR’s possible plan to try and include the use of DCRS into the Terms & Conditions of Registration for Debt Counsellors. Our members (who were not consulted) are determined to take a strong stand against any infringement of our rights and legal obligation to stick to the National Credit Act. NCR PROPOSAL REGARDING LEGAL FEES We are happy to see that the NCR are trying to curb the misuse of consumer’s legal fees. We do however find the suggestions made by the NCR thus far to be incomplete and impractical. WESTERN CAPE MEETING Members in the Western Cape should check in on the Facebook group for info on our upcoming meeting to be held in Cape Town. END OF YEAR COURT CLOSURE DATES The Chief Justice has announced that the Dies Non at the end of this year will run between Friday December 16th 2016 till Friday the 13th January 2017. NEDBANK LIMITED V JONES AND OTHERS We encourage our members to read this judgment and declaratory order. It has massive implications in regard to the use of DCRS and interest rate reductions: http://www.saflii.org/cgi-bin/disp.pl?file=za%2Fcases%2FZAWCHC%2F2016%2F139.html&query=nedbank+v+jones

www.allprodc.org

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

PROFESSIONAL DEBT COUNSELLING ATTORNEYS

T E L : 021 872 1968 1 1 MARKET STRE ET, PAA RL w w w.ste y nco etze e.co.za

DEBT COUNSELLING COMMUNITY SUPPORT DCCS Want To Thank Steyn Coetzee Attorneys For Their Support of Our Various Projects

DEBT COUNSELLING COMMUNITY SUPPORT

What makes your firm different from any other legal firm that is assisting debt counsellors with debt review matters? We try to give personal attention to clients and go above and beyond for our clients by defending summonses and negotiating on settlements on accounts where legal action has commenced without charging our clients for the extra service. If you could change one thing in the debt review process what will it be? We would like to force credit providers to reduce high interest rates to assist consumers. We would also make provision for contingencies in the consumer’s budget - which most courts sadly do not allow. What positive message can you give to our fellow readers and debt review clients to motivate them not to lose hope in the process? In the words of Mandela “It always seems impossible until it’s done”. People may feel like they will never get out of debt, but it is possible. You can do it! Want to help make the end of year holidays special for a struggling debt review family? Mail us on admin@dccsupport.co.za

CROUCHING TIGER, RISING DRAGON

When consulting with a consumer who is experiencing financial difficulty, one of the most commonly asked questions is: “What will I pay”? While this sounds like a straightforward question, it is actually quite complicated. This is because often consumers themselves are unsure of all their facts and figures and the full extent of their debt. More than that, each consumers situation is different from other consumers. This means that the fees and the eventual plan to solve each consumers situation will be different. Also credit providers sometimes change policies internally which effect what they would ideally be willing to accept without too much fight from a consumer. But that is not what an enquiring consumer wants to hear. They want some sort of glimpse of their future should they start debt review. Enter the DRAGON. DRAGON is an online assessment guide which can be used by debt counselling firms to help advise consumers when they first think about entering the process. DRAGON also features several visual ways of displaying not only the possible repayment plans but also the probable savings that may arise. They say seeing is believing and this visual display can help show consumers the benefits of signing up for debt review. DRAGON draws on information about common concessions regularly offered to consumers by credit providers (eg. through DCRS etc) to help produce a realistic road map which can help project what a consumer’s debt review case might eventually look like.

barry@debtdragon.co.za www.debtdragon.co.za

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