Debtfree Magazine Sept 2017 by Debtfree Magazine

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

FINDING THE RIGHT FEES September 2017 www.debtfreedigi.co.za

What you can expect from Hyphen PDA: • Increased Debt Counsellor Profitability • Flawless Systems • Meaningful Reporting • Contented Consumers!

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Chris van der Straaten, Head: PDA 082 557 0437

Malcom Povey, Head: Operations PDA 082 445 5604

Don’t expect to hear an endless amount of “spin” around why things failed!.

It has been a stormy few weeks for the world. America has been hit by multiple hurricanes including the largest storm ever recorded. Millions of people have been displaced and many have lost homes, businesses and more. Puerto Rico has had it’s electrical grid destroyed by the storm that hit there and they say it could be years before they restore electricity across the country. Elsewhere volcanoes are doing there thing and locally a storm of strike action and civil unrest has swept the nation. In the midst of all the drama, the debt review industry has faced something of a storm itself. The National Credit Regulator has made a proposal in regard to how they would like to potentially see consumers pay for debt review in the future. We take a look at this in both a general and close up manner this issue. We also consider what it is that consumers are paying for when they pay their monthly aftercare fees to Debt Counsellors and we look ahead to what will be best for the industry as a whole.

Cover image courtesy “Jannoon028/Freepik”

We have lots of credit related news and also reviews of recent industry events. We feature some good advice in our Debt Review School and hope you enjoy the new Questions from Readers section. If you have questions for future issues send them through to us on questions@ debtfreedigi.co.za You may feel that debt was a storm that swept through your life leaving nothing but despair and desolation in it’s wake. Perhaps the first few weeks of debt review were something like the proverbial calm in the eye of the storm before the routine of repaying debt swept you once again into the day to day of debt repayments (admittedly much more manageable ones). If so, consider this simple fact: today you are one step closer to paying off all your debt. You are probably closer now than ever before. Don’t let December or January derail your plans. Many consumers fall out of the process during these months ahead so, be smart, keep up your payments and soon, after the storm has past, you will still be standing and be debt free.

FROM THE

E D I T O R S DESK

FINDING THE RIGHT FEES

NEWS

NCR GUIDELINES

CAPITEC CONFERENCE

MARS TRUMPS JONES

SERVICE DIRECTORY

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any responsibility whatsoever for their activities. Debtfree Magazine contains material supplied to us by advertisers which does not necessarily reflect the views and opinions of the Debtfree Magazine team. No person, organization or party can copy or re-produce the content on this site and/or magazine or any part of this publication without a written consent from the editorsâ&#x20AC;&#x2122; panel and the author of the content, as applicable. Debtfree Magazine, authors and contributors reserve their rights with regards to copyright of their work.

C O N T E N T S

Finding the Right Fees The National Credit Regulator like to try and guide both consumers and Debt Counsellors in regard to what they think fair and reasonable fees for the debt review process. The NCR from time to time issue their opinion in a guideline to the industry. In the past, the NCR has issued two such opinions on fees. Since the last guideline they issued was many years ago and are chronically out of date, the NCR are now looking to update their fee guideline and have asked the public and industry to comment on one of the options they have been considering. The NCR hired a research firm to look into the process and make some suggestions. The firm, supposedly, met or chatted with around 20 different parties and returned to the NCR with 3 options. The NCR then announced that they would be hiring an actuary to look over the proposed fees and report back to them. This sadly has not happened due to budget constraints at the Regulator. At the same time, pressure has been mounting from those Debt Counsellors in the industry who stick closely to the NCR guideline for fees. They have had to cut salaries to staff or employ increasingly less qualified staff at lower salaries to offset the increased costs of running their practices. After several years of

discussions with the NCR on the topic the Debt Counsellors Association of South Africa began a petition relating to the fees. The NCR decided to put out a possible fee structure for public comment and this seems to have helped reduce the tensions that had built up. However the fee structure proposal has not been very popular. The current proposed fee structure promotes increased costs to consumers and reduced income to Debt Counsellors over time. [See our in-depth breakdown of the fee proposal in this issue] Many Debt Counsellors are concerned that the proposed fees promote helping mainly higher income consumers and ignoring lower income ones. The fee structure will also radically reduce income for Debt Counsellors and threaten their sustainability. Less sustainability leads to consumers facing additional costs and charges down the line when having to switch Debt Counsellors. Other Debt Counsellors are concerned that the fee structure might lead to aggressive promotion of debt review (all focused on signing new clients up) with little after care service to consumers. As has become increasingly obvious to all involved, the workload for a debt review matter increases exponentially as consumers start to finish off the process. The fees do not seem to reflect this.

Most groups and associations have expressed their gratitude for the NCR being willing to interact with the industry in regard to these proposed fees and that they are not taking a dogmatic approach to such a sensitive subject. Since many consumers may be guided by the NCRâ&#x20AC;&#x2122;s opinion on fees it is important that the industry engage with the NCR in regard to their guideline even though it is non binding. The NCR allowed for submission of comments on the fees throughout September. Debt Counsellor groups, associations, credit providers, attorneys, other industry organisations and individuals have all sent in comments and the NCR will no doubt take these into account in formulating their opinion on fees going forward. Since it is however the NCRâ&#x20AC;&#x2122;s opinion on fees (and not the industryâ&#x20AC;&#x2122;s) they are not obligated to do so but have shown good faith in calling for comment.

Will My Fees Change? If the NCR issue a new fee guideline in the next few months or next year it is unlikely to impact on the fees you currently pay for debt review. If you are under debt review, you probably have a court order which sets out the payment plan, month by month, until your debts are repaid. This calculation (along with the proposals which your credit providers received) factor in the fees that you have agreed to pay. To change these fees half way through the process could throw off all those calculations and lead to you breaking the requirements of the court order or agreements with your creditor providers. Thus it is unlikely that if you are already under debt review your fees will change. New consumers entering debt review after such a guideline is issued would potentially pay according to the NCR fee guideline (if that is what the debt counselling firm decides to charge).

QUESTIONS FROM OUR READERS

Q A

I left debt review a few weeks ago and recently went to apply for credit and was turned down because the debt review is still showing on the credit report. What can I do?

If the bank is saying they are seeing a debt review status on your credit bureau report once you have left debt review then you should do 3 things:

1. Talk to your old Debt Counsellor and ask them to chase the NCR to change your status on the NCRâ&#x20AC;&#x2122;s online debt help system. 2. Talk to the National Credit Regulator who update the credit bureaus on consumers debt review status (when they start and finish debt review) to change your status on the debt help system (call 0860 NCR NCR) 3. You can submit a query/complaint at each of the big credit bureaus asking them to remove any such status. Each bureau has an online form you can get from their website. Send along the form your Debt Counsellor gave you when you left (or finished) debt review.

COURT MATTERS Mars Ruling Undoes Damage of Nedbank V Jones Over the last few months, consumers in the Western Cape have been experiencing problems with their local courts in the wake of a judgment handed down in a matter between Nedbank and a consumer (Jones). In that particular case, Nedbank was concerned that a court had made a debt review court order changing interest rates without the bank agreeing to lower rates. On appeal, the court made an order which, due to misinterpretation, caused chaos across the province and began to hold up consumerâ&#x20AC;&#x2122;s debt review court applications.

â&#x20AC;&#x2DC;The National Credit Act (NCA) makes provision for changing the time it takes to pay back the money and the amount paid but is silent on changing interest ratesâ&#x20AC;&#x2122; In many other types of court matters (like a sequestration or administration), the courts are empowered to do some pretty amazing things with debt, including adjusting interest rates. However, since the NCA does not specifically grant this power to a court for a debt review matter, the courts generally leave it alone, unless the credit providers send letters with the court papers, saying that they want to change the interest rates.

Why Would Credit Providers Lower Interest? Lowering interest rates for consumers under debt review helps to assist the consumer and to helps to get the debt paid up faster. This, in turn, shows good faith towards their client and helps their client get back into the credit market sooner. Helping a consumer while in financial trouble today may well help retain that client and their family in the future. In many cases, credit providers will even help consumers under debt review by lowering the interest rate all the way down to zero %. Particularly is this the case with unsecured credit. This is one of the reasons why debt review is such a good option for consumers struggling with debt. Cutting out things like account fees and reducing interest can help save thousands of rand over time. Jones There were a number of issues with the initial ruling in the Jones matter which was later appealed by Nedbank. From interest rates fixed without any term given, to such small payments that the debts began to grow over time, issues abounded. Thus Nedbank felt they had to appeal and hoped to have the court order that rates shouldnâ&#x20AC;&#x2122;t be changed without the bank agreeing or asking for such a reduction. The ruling in the Nedbank v Jones matter had to do specifically with that consumerâ&#x20AC;&#x2122;s case but mentioned that courts in general shouldnâ&#x20AC;&#x2122;t just go ahead and change interest rates if they simply felt like it since the NCA does not allow for it. This made several other local courts worry that they were perhaps acting outside the powers granted them by the NCA when dealing with debt review applications. As a result, some stopped granting orders even where the various credit providers had themselves asked for lowered interest rates. Credit providers, like Nedbank, argued that where they had agreed to lower rates to help the consumer then the court should be able to make such an order and it would not conflict with the NCA. Preventing this was not their intention with the Jones matter. Regardless, court orders for debt review soon got snarled up in the Western Cape, leaving consumers dangerously exposed to additional litigation and further costs from unscrupulous creditors trying to get out of the debt review.

COURT MATTERS Read The Jones Ruling Here: Norris In a similar case involving Nedbank (v Norris), the bank was concerned that the granted court order for debt review did not make provision for insurance payments on their debt and totally removed all interest on their account without consent. As a result, the banks appeal in that case also lead to a ruling which caused confusion about reducing interest with or without consent. Jones Matter Causes Trouble At Court Soon Debt Counsellors had to get sneaky and began to leave out any reference to interest rates in the debt review applications to court. Rather than mention the interest rate and repayment amount, they now simply mentioned the repayment amount and the term it would take to repay the debt. This then involved trusting that the credit providers would later stick to whatever rate agreement was made behind the scenes and leaving it out of the court papers. While this worked in some matters, it did not in others where the courts felt trapped and still refused to grant orders. The issue then began to grow, spreading to more and more courts and urgently needed to be addressed somehow. Mars Debt Counselling firm, Octogen had a debt review matter for their client Mz Mars which was affected by the Jones ruling and interpretation of the local courts. Octogen then decided to appeal the Mars matter when the court used the Jones ruling as a reason not to grant the application. The Octogen case was recently heard in the High Court in Cape Town and the positive ruling undoes some of the damage done by the Jones and Norris matters. The case was heard and ruled on by three High Court Judges which gives it extra clout in legal circles and should now guide all Western Cape Magistrate courts who were concerned about what the ruling in the Jones matter actually meant.

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COURT MATTERS

â&#x20AC;&#x2DC;the ruling undoes some of the damage done by the Jones and Norris matterâ&#x20AC;&#x2122; The ruling specifically mentions that the case of Nedbank v Jones 2017 (2) SA473( WCC) is not authority for the Magistrateâ&#x20AC;&#x2122;s refusal to make the consent orders proposed in this case and similar cases. Magistrates should now no longer refuse to grant reduced rates where consented to because of the confusion around the Jones matter. This is now superseded by this ruling which says it can be done. The ruling then goes on to list some of the cases currently being delayed in Worster Magistrates Court but the 3 Judge High Court ruling will provide clarity for all lower courts in the region not just Worster. Magistrates are encouraged in the Mars ruling to apply their mind to all relevant factors of each case and to, where necessary, vary the duration, the instalments and interest which forms part of the indebtedness in order to achieve an equitable and fair result for all parties. (see paragraph 38). Download the Mars Ruling Here

If a Debt Counsellor makes a proposal to court (which is served on all parties involved) that a credit provider does not like, then the credit provider is able to send a legal representative to court to oppose the matter and ask the court to make a slightly different order. Sometimes however with the thousands of court matters going on it is possible that a matter could slip by unnoticed or not attended to by an attorney and only picked up later once the court has already granted the order. The creditor can then either abide by the court order or ask the court to change the order after the fact.

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INDUSTRY

CONSUMER

NEWS FLASH For daily debt counselling news in 3 minutes or less visit www.debtfreedigi.co.za

SHOPRITE HIT WITH R1 MILLION FINE

The National Consumer Tribunal (NCT) has fined Shoprite R1 Million over contraventions of the National Credit Act with regard to reckless lending. The matter was brought before the NCT by the National Credit Regulator (NCR) after allegations were made that Shoprite was giving consumers credit without following all the legal requirements. The National Credit Act says that before issuing someone credit, a credit provider needs to (1) figure out if the consumer can afford to repay it (an assessment) and has to (2) provide the consumer documents they can understand, and (3) provide a quote (pre-agreement) and then (4) contract documents which point out the entire cost of credit and (5) are signed by everyone.

cases, there was no actual proof of these other people’s income. If a credit provider fails to do a full and proper assessment and fails to gather information they could realistically get (by looking over bank statements or drawing a credit record or by asking the consumer to supply the proof), then this is considered reckless and this applies even if the consumer is actually able to repay the credit. The NCT handed down the R1 Million fine and has told Shoprite to find a Debt Counsellor to assist with figuring out if these consumers were (or now are) over indebted. This will presumably have a bearing on whether the debts are then set aside (the consumer doesn’t have to pay them or the credit provider has to pay them back whatever instalments they already paid) or not.

The NCT found that when people were applying for credit with Shoprite, they were granting credit based on the NCT MOTION COURT DATES income of others in the household (like The National Consumer Tribunal hears the applicant’s wife, husband or partner). debt review matters (86(7)(b)) where all The problem with that was that, in many parties are happy with the plan proposed

NEWS CONTINUED

by the Debt Counsellor. These are called Consent Orders. They are then able to issue an Order which has the same force as a High Court Order restructuring the debt. Every quarter the NCT receive around 6000 (or more) of these applications, with roughly half originating in the Western Cape, while the remaining 50% come from other provinces. Though the NCT are based in Gauteng, they travel the country holding what are called â&#x20AC;&#x153;motion courtsâ&#x20AC;? in order to make access to themselves easier to Debt Counsellors making these debt review applications.

agencies like Moodeys) and a possible huge hike in electricity costs coming. The Committee itself had to debate the decision for some time as the 6 members were split 3 in favour of a drop and 3 in favour of it remaining the same. In the end, caution won out. The rate remains unchanged at 6.75%, as do all the other rates which are based on this rate (like the one you pay on your credit card or homeloan).

CONSUMER FRIEND SWITCH TO DREX

In recent correspondence with Debt Counsellors, Consumer Friend (who Dates: represent a number of credit providers Durban - 11-13 October 2017 with regard to debt review) announced Centurion - 19-20 October 2017 that they are switching over to the much Cape Town - 23-25 October 2017 anticipated DReX system at the end of September 2017. The system will allow Time: 08:00-16:00 Debt Counsellors to draw consumer info direct and live from Consumer REPO RATE DISAPPOINTMENT Friend reducing the need for hours on This month saw the latest announcement the phone or emails back and forth. from the SARB Monetary Policy Committee as to whether the Repo Rate They have however warned that this would stay the same or possibly even would result in some delays in providing drop (as many people hoped).Sadly the statements and CoBs for a short time. Monetary Policy Committee decided to They announced that their system err on the side of caution, citing reasons freeze begins on Friday 29 September like political instability and the danger of 2017 and that Debt Counsellors should sovereign debt ratings dropping (from expect the following disruptions:

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NEWS CONTINUED

• No COB’s will be sent from Friday 29 September 2017 to Tuesday 3 October 2017; • No statements and balances will be provided from Friday 29 September 2017 to Thursday 5 October 2017; and • No calls will be taken from Friday 29 September 2017 to Thursday 5 October 2017. They say they expect to be fully operational with DReX by Thursday 5 October 2017.

Department - 17.1’s nca@consumerfriend.co.za applications@consumerfriend.co.za Department - Proposals proposal@consumerfriend.co.za proposals@consumerfriend.co.za Department - Court court@consumerfriend.co.za courts@consumerfriend.co.za

Department - Queries queries@consumerfriend.co.za If Debt Counsellors have not yet customeraccounts@consumerfriend.co.za registered for access to the online DReX portal, they can do so at the following Department - Complaints address: http://www.consumerfriend. complaints@consumerfriend.co.za co.za/drex-registration . complaints@consumerfriend.co.za

CONSUMER FRIEND CHANGE EMAIL ADDRESSES

Sending correspondence to the right address at a credit provider can make or break a debt review application. It is important to use the correct contact details in order to avoid delays or miscommunications. At the end of September and beginning of October 2017, credit provider service provider, Consumer Friend are migrating to a new operating system called DReX. Along with that change comes some changes to their email addresses.

The good news is that this does not impact on any emails and correspondence you have already sent them.

PICK N PAY OFFER FOOD ON CREDIT

Pick n Pay is busy transitioning their very familiar smart shopper rewards card into a clever but dangerous short term credit facility. Consumers have become familiar with the smart shopper rewards card and enjoy the benefits of discounts on

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various products and accruing cash back points. Working together with RCS, Pick n Pay will now be offering credit facilities between R1000 and R40 000, depending on consumers creditworthiness. If the debt is paid back within the standard 55 days there will be no additional charges beyond the R10 monthly fee. Pick N Pay have decided on a low monthly fee though they could charge a much higher one based on the National Credit Act if they chose to. They have also chosen to forego any initiation fees and will rather offer clients R200 back on their initial purchase on credit (of over R500). All these steps are being taken in an effort to make the offering as user friendly and attractive as possible. As to the rate each consumer will be charged for payments after the initial charge free period, this will vary slightly from consumer to consumer but you can be sure that the cost will be high and close to the maximum allowable 28% per annum. Consumers will also be offered the opportunity to take credit insurance if they want to but will have to do so at an additional charge. Consumers who fall behind on payments will face all the usual negative non payment consequences; negative credit bureau listings, default administration

costs and of course, possible legal action to collect the debt if traditional pestering collections methods fail. Pick n Pay are reacting to the actions of their competitors (like Woolies and Massmart) and the needs of their increasingly cash-strapped clients. Consumers are not spending as much as they used to as they adjust their budgets and spending habits to try make ends meet. PnP too are feeling the pinch of tight financial times and must feel the risk to reward ratio of offering food on credit is worth it. RCS who will have to do all the collecting and carry much of the risk on delinquencies will enjoy the opportunity to offer so many potential clients a line of credit for a product that all consumers actually need.

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IN A NUTSHELL

SPRING CLEAN YOUR FINANCES Spring has arrived and with that the opportunity to Spring clean. However, instead of Spring-cleaning your cupboards, how about Spring-cleaning your finances? The first step in the Spring-cleaning process is to take stock of the current situation. Taking stock means drawing up a list of all your accounts and debts and checking the interest that you are paying on the various accounts.

Go through unopened mail and emails and check if there are accounts that are in arrears. Draw the last three months of bank statements and make a list of what

money has been spent on paying bills versus unplanned spending, versus saving. Based on the analysis of your bank statement, and accounts you should be able to draw up a monthly budget. Unplanned spending is usually as a result of poor planning, poor saving habits and poor goal setting. If you know in advance that you need to buy an outfit for a special occasion or that you would like to go on a holiday at some point in the future, then you could purposefully put money aside for these occasions and goals. Try and save as much of your salary as possible. Initially, you can start with as little as 10% of your salary after taxes, and eventually build up to 20-30%. Savings are a measure of protection for both unforeseen times as well as planning for the much-needed vacation that you have been longing for. However, there is no point saving money if your debt obligations are not being met. This is the same as burying your head in the sand and hoping that the debt will go away. Whilst Spring-cleaning your finances bear in mind the following advice on money management:

• Store cards and credit cards are highinterest rate vehicles and should not be used as ways to extend your income when you can’t afford to spend the money in the first place. Ideally, pay-off store cards and cancel these accounts. • If you can’t afford it, don’t buy it. • Pay-off your credit card every month. Don’t allow the outstanding balance to accumulate to unmanageable levels. • Don’t be coerced by call centre agents, SMS’s and emails extending and offering you more credit. Limit the temptation to spend beyond your limit. • Re-negotiate your existing debt with your credit providers, if possible. During the process of Spring-cleaning, you may discover that actually, you are way more over-indebted than you realised. The signs that you may need help are: • Skipping credit obligations on a monthly basis • Using one credit card to pay another, because you can no longer service your credit card or store card debt from your monthly income • Obtaining short-term, high interest,

loans to pay for daily living expenses • Numerous letters of demand from creditors clogging your mailboxes • Several Emolument Attachments and or Garnishee Orders When you realise that your debt obligations are completely out of control, the wisest thing to do is to speak to an NCR accredited debt counsellor. The DCM Group is affiliated with a

premier, national network of accredited, independent debt counsellors to assist over-indebted consumers. If you are under debt review, your payments have to be collected and distributed by a payment distribution agency, such as the National Payment Distribution Agency (NPDA). Payment Distribution agencies act to safeguard consumer payments and ensure correct distribution.

IN A NUTSHELL is brought you by the DCM Business Partnership Programme™, designed to support debt counsellors and consumers during the debt review process. 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

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Die Republiek van

SKYT AFRICA Hallo almal, Ek wil in hierdie artikel gesels oor twee maande wat veronderstel is om vreugdevol te wees maar wat ons ook tog bangmaak. Dit is Desember en Januarie. Tradisioneel is dit vir baie n welkome breek om met vakansie te gaan, vriende en familie te onthaal en n tyd om geskenke uit te deel. Julle sal miskien dink ek is koekoes om noual oor hierdie te praat want dis nog doer in die toekoms. Tog nie want jy kan nooit te vroeg beplan nie want met beplanning kom oordeelkundige besluite, oordeelkundige finansieele besluite. Ons weet teen hierdie tyd dat om geld op die ingewing van die oomblik te spandeer sekerlik tot latere berou gaan ly.

Daar is kinders wat vir die eerste keer skool gaan of groot skool toe gaan of selfs na die volgende standerd toe gaan. Dit is vir hulle n tyd van groot vreugde en soms n bietjie bang wees, daardie trotse oomblik wanneer hulle in die nuwe skoolklere voor die kamera staan vir Pa en Ma om die foto te neem wat vir altyd in die familie foto album sal pronk. Pa en Ma ook ewe trots maar

seker met n klein bietjie weemoed, gaan my kind okay wees? As jy teen hierdie tyd nog nie vir hierdie uitgawes van skoolklere, skoolskoene, atletiekklere, skoolfonds, naskool, vervoer, skoolboeke en skooluitstappies beplan het en voorsiening gemaak het nie gaan dit die vreugdevure beslis demp. Jy wil tog sekerlik nie geld leen om al hierdie uitgawes te dek nie, jy het immers n jaar gehad om hiervoor te beplan, selfs al is jy onder skuldberadering het jou Skuldberaderer vir jou gese om maandeliks fondse hiervoor weg te sit, hopelik het jy gehoor gegee sodat jy hierdie wonderlike oomblik terdee met jou kind kan geniet en nie vreesbevange te wonder waar die geld vandaan gaan kom nie. Dieselfde met die Kersseisoen, die kinders verwag geskenke, die kinders wil graag met vakansie gaan, Pa en Ma

het die hele jaar hard gewerk en verdien n blaaskans maar hoe gemaak as die fondse skraps is? Net die ultra rykes kan dit bekostig om vir drie weke te gaan vakansie hou maar vir ons moet dit meer gaan oor kwaliteit en nie kwantiteit nie, n wegbreek wat miskien net drie of vier dae is en onvergeetlik gemaak is deur die kwaliteit tyd wat ons as gesin saam met mekaar spandeer het, die onvergeetlike herinneringe en nog fotos vir die album. Goedkoop is nie noodwendig altyd duurkoop nie veral nie as die beplanning reg is nie. So eintlik is Desember en Januarie nie so ver in die verskiet in nie en dit is nou die geleentheid om na jou begroting te kyk en realisties te beplan en nee, moenie eers daaraan dink om jou paaiemente te skip nie, jy loop die werklike risiko om jou finansies heeltemal te verongeluk.

Groetnis. Christo Hattingh Kyk gerus my LinkedIn profile: https://www.linkedin.com/in/christo-hattingh-351a52130/ * Seriously please do let us know if you found this article to be funny/offensive/amusing/interesting feedback@debtfreedigi.co.za

NCPDA2 REG. 2 00 8/01 874 1/0 7

TRANSPARENCY INTEGRITY COMPLIANCE

PAYMENT DISTRIBUTION AGENCY

COMPANY BACKGROUND On 28 August 2008, DC Partner began distributing funds newly appointed by the National Credit Regulator as a accredited Payment Distribution Agent. DC Partner’s business has continued to steadily grow ever since 2008 and is a financially strong company that strives for excellent service to our customers. DC Partner is one of only three NCR accredited PDA’s in South Africa and its operations are based out of the scenic town of George in the beautiful Southern Cape, with satellite offices in Pretoria and Cape Town. At present, the company employs roughly 100 people. DC Partner has a high level of commitment and quality control.

SECURE DI STRIBUTI ON OF DEBT REVIEW FUNDS DC Partner takes pride in providing accurate and timely distributions. After all, the ability to accurately and speedily distribute funds from consumers to credit providers forms the cornerstone of the debt review cycle. Distributions are strictly done according to the distribution plan provided by the relevant debt counselor.

WHY CHOOSE DC PARTNER AS PDA? A client relationship officer is assigned for EACH Debt Counsellor – Single point of contact & communication! We assist to follow up on default clients, unpaid funds and unidentified deposits. National representation – Frequent face to face visits to your office by skilled, trained agents. Automated e-mails which can be sent directly from our system – 17.1, 17.2, proposals, cascades etc. Systematized client statements for each distribution sent as e-mail or sms. Daily Distributions on all clients. 24 Hour access to our system (Including distribution data) from any PC, Cell Phone or tablet with internet access. Individual, dedicated business bank account for each debt counsellor. Multiple management review reports accessible directly to manage your debt review business and processes.

HEAD OFFICE: 59 VICTORIA STREET, GEORGE TEL: 044 873 4530 EMAIL: PDA@DCPARTNER.CO.ZA WWW.DCPARTNER.CO.ZA

NCR Guideline for Debt Counselling Fees

WARNING:

This is a long article.

Skip it if you donâ&#x20AC;&#x2122;t really care

SKIP

After several years and a lot of mounting pressure within the industry, the National Credit Regulator (NCR) have revisited their opinion on what fees might be charged for debt review services. They have issued a potential guideline of new fees which reduces income for Debt Counsellors and pushes up fees for consumers. Letâ&#x20AC;&#x2122;s take a closer look at what has been proposed and some of the items needing clarification or possible adjustment.

Application Fees

The Application fee is, in fact, the only fee mentioned in the National Credit Act. It is set at R50. No other fees are mentioned. For this reason, past guidelines have set this fee at R50 and left it there.

Proposed Debt Counselling Fee Structure

Application Fee (for completion and submission of Form 16)- R50 (as prescribed in the Act) â&#x20AC;&#x201C; To be paid up front and in full. Nobody takes cash up front from applying customers. If they did customers would probably not apply. There are already enough obstacles preventing people from getting the debt help they need. The NCR have issued terms and conditions of registration to many new Debt Counsellors which specifically bar them from accepting payment directly from a consumer. This may be contrary to the right held out in the National Credit Act which says a Debt Counsellor must issue a consumer with a receipt when they accept payment from a consumer for such an application. Recent Debt Counsellor Terms and Conditions probably need to be amended to allow for receipt of payments from consumers either generally or specifically for application fees. Otherwise, a Debt Counsellor could, in a crazy set of circumstances, be deregistered by the NCT for accepting cash as per this NCR proposed guideline. Please note that this proposed fee guideline is currently non-enforceable and non-binding, as it is simply an opinion on what fees the NCR feel might be reasonable.

Proposed Debt Counselling Fee Structure

Administration Fee (New Fee) for: (a) a Preliminary assessment of over-indebtedness; (b) Forms 17.1 process; and (c) loading the consumer on Debt Help System – R250- paid up front and in full. Debt Counsellors check out a consumers situation and if they appear to be overindebted they submit the consumers matter to court or the NCT for the consumer to officially be declared “over-indebted” (please note the Debt Counsellor cannot declare someone over indebted only make such an averment which needs to be made official or actual by those with authority to do so. For example, a Debt Counsellor may send a matter to court and the court could find that they do not think the consumer is over indebted and reject the application. This new fee seems to be an acknowledgement from the NCR that it costs time and money to have a look over a consumers matter during an initial consultation when they are looking for help. It is like how a doctor often charges a little extra for that very first visit when they get to know you and spend more time with you. Many Debt Counsellors can spend up to 3 hours with a consumer discussing their situation to help get a feel for how the consumer got into trouble and what is needed in the way of changed spending habits and dealing with debt. Will a Debt Counsellor chase off clients by making them pay R50 + R250 upfront? It is unlikely that anyone will be asked to hand over money when walking into a Debt Counsellor’s office wanting an appointment.

The ‘Average‘ Debt Counsellor

The majority of Debt Counsellors in South Africa (and there are not many) are small operations and help around 100 clients. Then there are around 10 very large firms who each service over 4000 clients at the same time. It is estimated that of those large firms the top 4 each service around 10 000 clients or more at the same time. Obviously then the largest firms help the most people at the same time and thus their needs need to be considered. At the same time, the majority of counsellors have found that they can only help around 100 clients at the same time and often do a second job or have a second revenue stream to supplement their income due to the fact that the process is not very profitable as a small business. This is, in many ways, a reaction to the current fee structure. Over time around 1800 qualified Debt Counsellors have either not bothered to practice, have stopped taking on new clients or have left the industry. This then leaves around 700 practicing Debt Counsellors for consumers to choose from.

What if Applicants Don’t Qualify or Need Debt Review?

Sometimes with some budgeting advice and a good debt counselling consultation, a consumer can get advice and not need to enter the formal debt review process. In such a case the Debt Counsellor could, in the past, charge a “Rejection” fee. Actually, this was probably the best possible outcome possible. Realistically such circumstances seldom happened. Some Debt Counsellors later came to view this fee as a charge you take from consumers when they decide to leave debt review (which not actually according to the wording in the previous fee guideline).

Proposed Debt Counselling Fee Structure Determination Fee: (3.1 Rejection Fee) for the Form 17.2 (b) process, including: (a) notifying the consumer and credit providers; and (b) updating DHS (the NCR’s online data base) – R200 – to be paid upon rejection.

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Some people just need budgeting help and this fee could cover that but the reality is that you are now asking the consumer to pay you for telling them you will not help them. You realistically will never receive this payment and it simply creates a collections (and bookkeeping) nightmare. It might be better to introduce a consultation fee that would fit with the idea of helping consumers with budgeting but not require that the NCR’s data base be updated if the consumer does not need or qualify for debt review.

The Average Debt Review Consumer

Though identifying the average debt review consumer is difficult and may vary from company to company (since they market to different people) the average consumer in debt review is said to end up paying around R2500 (once their debt is eventually restructured). It is said they have 7 to 10 credit accounts when entering the process.

Unintentionally Extending the Payment Timeline

All the proposed fees up to this point seem to be charged up front or right away. So, in theory, this is Month One of the process. Now, due to the proposed changes, if the application is made near the end of the month, the next set of fees then seems to only be charged at the end of Month Two. This is a huge change from previously when all the restructuring fees were traditionally charged in Month One and then legal fees in Month Two and then Creditor Payments often began from Month Three. The new fee structure seems (in the case of the “average” consumer) to create the Credit Provider dreaded “payment holiday” after paying only R300 in application fees in month one when applying.

Proposed Debt Counselling Fee Structure Determination Fee: (3.2 Restructuring Fee) for the Form 17.2(a) process including but not limited to, the following related services:

(a) (b) (c) (d) (e) (f) (g) (h) (i)

proposal preparation loading of the plan on the debt counsellor’s PDA profile negotiations with credit providers; submission of final proposal; Supplying debt counselling documents to the attorney to draft the Court application; update DHS on progress; transfer of consumers (all fees as per process should be up to date); Instruction to attorney to draft the Court application/collation and filing of NCT application; and Withdrawal by consumer (Form 17.w).

The recommended amount is Equal to the distributable amount, capped at R6500 for a single applicant and capped at R7000 for more than one applicant. The fees are payable after submission of the proposal. It is a once off payment and subsequent services aligned to the process will not be charged separately should they apply (i.e transfers, withdrawals, etc) where the consumers has already made the payment. It is good to see added clarity added clarity and protection for consumers in the list of associated services covered by this fee. Raising of the caps seems to be a n increase in income but is, at best, an empty gesture since the ‘average’ consumer pays R2500. The cap is sadly irrelevant in the real world in most cases. At worst, raising the cap is an incentive to try drive Debt Counsellors to focus on trying to help mainly rich people with money problems rather than assist the poor of the country (who make up the majority of people who actually need help). The restructuring fee is only charged after the submission of proposals. So if the application is made within one, two or even in some cases 3 weeks of the end of a month then Month One will only see R300 (R50 + R250) paid to the Debt Counsellor and then payment of the restructuring payment at the end of month Two.

NCR Proposed Fee Guideline – After Care Fees

Currently a monthly after care fee is charged for ongoing service by the Debt Counsellor. It is somewhat like a membership fee or a club fee or an account fee or

a retainer paid to an attorney. It is a monthly fee which the consumer pays rather than sporadic payments to cover specific functions by the Debt Counsellor. As you can imagine while trying to work out a payment plan over many years it would be hard to factor in occasional fees that are charged every now and then in varying amounts from time to time. At the moment it is said that Debt Counsellors earn less than R90 an hour which is very low for a professional dealing with finance and legal matters. Most hoped to see a small increase in after care fees or at least the fee remain at 5% without dropping after 24 months to 3% which has really hurt debt counselling firms in the face of the huge workload that comes as time passes. Especially when consumers start to look to leave the process has the workload increased exponentially. In the past, due to the lowering of after care fees, there has been less concern about retaining clients and an unhealthy focus on client acquisition for the initial fee. Low after care income has also driven poor after care service to consumers.

The Proposed Fee Guideline 4. After care fee Which includes: (a) Form 17.2(c) process (b) Review of consumerâ&#x20AC;&#x2122;s financial situation; (c) Attending to payment queries; (d) Clearance certificate process, including securing the paid up letters; (e) Withdrawal by consumer (Form 17.W process); and (f) Updating of DHS on progress The fee would be 5% of the distributable amount, capped at R450 for a period of 12 months, thereafter reduced to 3% of the distributable amount, capped at R450 for the remaining period. However, these fees can only be charged and payable after the restructuring process and subject to the rendering of after care services. The main issue here is the reduction in after care fees (particularly month 13 through 24) which fees help sustain small Debt Counselling practices who do not take on

many clients at the same time. Businesses which are already under strain now face an approximate 15% drop in ongoing income (factoring in restructuring fees and various clients at varying stages of the process) and a 40% drop purely on after care fees in the first 24 months. Dropping the after care fee sooner (12 months sooner) will undoubtedly push many smaller firms out of business and also drive poor behaviour by firms who will tend to focus on getting clients into the process over educating and caring for them once in the process. This after care fee model reduces the after care income and will also reduce the amount of after care consumers receive. Some would say that the key is to then take on more clients to get the restructuring fee more often to boost income. However, there are only so many hours in a day and so many resources a Debt Counsellor has. Continued growth simply means continued expansion of over heads and costs. Also, many Debt Counsellors have found that they struggle to find new clients since they have no budget for advertising and no dedicated sales staff. So, the solution may appear to lie in taking on clients with a higher distribution amount to repay each month. Once again this then appears to be an incentive to ignore poorer consumers with small debt amounts. There is also no clarity on whether the after care fee will be paid monthly if one of the services mentioned is rendered or not. Raising or maintaining the 5% after care fee is more likely to make debt counselling practices sustainable and will help ensure clients get service throughout the lifespan of their debt review. This will give consumers peace of mind knowing they can deal with smaller firms who can be sustainable and will still be in business in 5 years time.

The Proposed Fee Guideline

5. Reckless Lending Fee (New Fee) This fee covers (1) Reckless lending assessment; (b) instructing of the attorney to draft the affidavit and (c) Supplying reckless lending documents to the attorney to draft the affidavit on the assessment outcome. The recommended amount is R250 per credit agreement and should be paid (subject

to the consumer requesting a declaration of reckless lending) after the assessment. At first glance, this appears to be an increase in income to Debt Counsellors because, in the past, they were expected to do this work at no cost. Many Debt Counsellors will thus be incentivised to look into reckless lending on every account consumers have. If so, the credit providers will be hard pressed to cooperate. The challenge with these investigations has and probably always will be getting the needed documents from the credit providers. As has been seen in so many securitization cases the original documents often are not accessible. At present too few reckless lending investigations happen due to the fact that it is estimated (by the 2014 DCASA research) to double the amount of hours taken in a debt review matter. Double the work for no extra money. This is now set to potentially change. Another thing that is set to change is the legal fees which will need to be charged to cover the costs of credit providers fighting any court orders which mention reckless lending. Since there can be fines of R1 million it is clear why, even if the debt is tiny. Legal fees can then be expected to double or potentially even quadruple to cover these associated costs. To cover the extra legal fees, several months of payments might have to go by for the ‘average’ consumer toward these costs before payments to creditors begin. Some courts have recently handed down costs against Debt Counsellors following the NCR’s previous fee guideline which resulted in payment delays to the credit providers which the Credit Providers attorneys argued put the consumer’s accounts into default. Now with much longer payment delays, will this argument become a common issue across every court in the country? Will Debt Counsellors face even more punitive cost orders driving them out of business for following the NCR’s guidelines? The truth is that no-one would be motivated to do an entire reckless lending investigation purely to get R250 (if that is what the wording means and not R250 x the amount of accounts the consumer has). It would not financially be worthwhile. One solution is to then increase the amount and reconsider when this payment

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would be made and how funds would be set aside. Since the NCR (and Government) want to drive reckless credit investigations and many attorneys and Debt Counsellors would like to earn more, this section has the potential to turn the industry into a bloodbath of extra costs to consumers and long drawn out expensive court battles.

NCT Applications

Certain types of debt review matters can be put before the National Consumer Tribunal (NCT). To do so a Debt Counsellor needs to pay R200 and then after a few weeks, the matter will be heard (often by a travelling motion court). The NCT can then issue an order restructuring the debt (as long as all parties are happy with the plan). In the past, the NCR suggested that Debt Counsellors can charge R750 for their services in regard to preparing NCT documentation and matters (eg. briefing of the attorneys). This fee is now being re-branded and the rate dropped dramatically.

The Proposed Fee Guideline 6. NCT submission fee This will cover the submission of the NCT application and R500 can be charged (and become payable after completion of the debt restructuring process). What exactly is the ‘completion’ of the restructuring process? Is it when the debt is finally all paid? Hopefully not. No, it does not seem that this is the intent but the wording is somewhat ambiguous. It may just be when the NCT restructure the debt in their order. But what if the NCT are busy for months at a time (as has been the case in the past) or the matter is delayed for a long while? When then is the money set aside? Would it suddenly come out of the consumer’s payment on the very month the order is granted? This might be hard to factor into the repayment plan since the Debt Counsellor would not know in advance when that will be exactly. What if for one

reason or another the NCT application is not granted and the matter has to go to court? Does that mean this fee would never be charged even though all the work was done? Since the application to the NCT costs R200 and is often paid by the Debt Counsellor, the Debt Counsellor would now be taking an effective R300 to cover his time and effort of trying to gain consent from all parties. Some feel that the R200 application cost is not a fee but a disbursement associated with the process. They point out that the NCT is not governed by this guideline and could put up applications fees to (eg) R600 or more next year. Thus they say that the Debt Counsellor would still be in line for the full R500 and the consumer would cover the R200. Reducing this fee seems however to be a reduction in incentive to drive matters via the NCT where possible. Rather it incentivizes Debt Counsellors sending matters back to the Magistrate Courts where consumers may face higher legal costs. Most Debt Counsellors were surprised not to see this fee increase.

The Proposed Fee Guideline 7. Attorney fee This will cover (a) drafting of the Court application; and (b) Attendance at Court. The recommended amount is to be agreed upon with the attorney upfront and communicated to the consumer on application. Debt counsellors are advised to negotiate that the legal fee be aligned to the disposable income of the consumer where possible. This is to be charged and payable after completion of the restructuring process. It is good to see that the NCR being cautious in regard to trying to limit and dictate fees for attorneys. Attorneys are very particular about their fees and the limits. The NCR has no authority over attorneys and have recently rather been engaging with the various law societies about their members and how they handle debt review matters.

It is good that the NCR want consumers to have a clear idea of what their legal fees will be. As a consumer, it is important to know what you are going to pay (where possible) for a service. It also seems likely, based on the proposed time of payment, that the NCR would like to see consumers actually getting the service they are paying for before they have to pay for it. This may be in an effort to prevent consumers from being taken advantage of by firms who never actually provide the legal services which the consumer is paying for. Because each consumers matter is unique, when the process begins it is unknown how many accounts the consumer actually has, the legal status of each account, the possibility of achieving consent to proposals that have yet to be made, it is very difficult to know whether the matter will go to the Tribunal or the Magistrates court. All of these factors (and more) affect what the possible charges will/could be from the attorney. It is therefore hard if not impossible to know upfront what fees will be (100%). In most cases, the Attorneys want their agreed fees set aside in their trust account before the work begins. This is because they run a business where unhappy clients tend not to pay if things donâ&#x20AC;&#x2122;t go their way. The proposed fee guideline calls for upfront quotes and payment only after the completion of the restructuring process. All the attorneys that Debtfree spoke to said they will not be prepared to wait for payment after the fact and want payment set aside as soon as possible before they commence work. If payment of attorneys fees is only to happen once a court order is granted then what month will that be? It is important since that is the month in which fees would be taken from the consumers monthly repayment distribution. How does the Debt Counsellor factor that in while preparing the repayment proposal to the credit providers and the court? Which month will that be? How does the Debt Counsellor know what the bill will be (unless agreed and fixed up front some how)? Will the credit providers be happy to suddenly have their repayment skipped or reduced in that particular month?

The fee guideline is sadly quiet about subsequent legal costs which may arise during the process (Eg. recessions and amendments due to the consumer leaving the process or annual review resulting in a new payment proposal). It also does not cover advocates fees when defending matters at high court - for vehicle repossessions which may form part of the needed legal services during the lifespan of the debt review. Once again attorneys fees remain a tricky subject and some additional thought might be needed in regard to the specific wording of the guideline here. It is unclear if the NCR are purposefully trying to reduce the use of the NCT and reduce sustainability of smaller debt review practices while pushing up costs for consumers. The fees, as proposed, do have these effects and thus once all the comments are in from the industry, it will be interesting to see how the NCR react. Many other parts of the industry have also been hit by reductions in income (none as hard as the PDAs). The negative consequences to consumers however need to be factored in. Consumers want to deal with sustainable service providers and want to avoid having to pay increased costs if they have to find a new service provider half way through the process because their old one went out of business.

It would be nice to see a fee guideline which prioritises keeping consumers in the process to its conclusion, while educating them about credit use. All eyes now turn to the NCR to see if they will release a second and third possible set of guidelines, as provided to them by their research firm or if they will factor in comments and release a revised version of this guideline to the industry.

DONâ&#x20AC;&#x2122;T WORK WITH AN OUT DATED VERSION OF THE ACT

UPDATED 2016

We are happy to announce that the Amended National Credit Act booklet is now available via our shop. Get the latest version for only R250.00

ORDER NOW http://debtfreedigi.co.za/product/pocket-sized-national-credit-act-booklet/

DEBT COUNSELLORS ASSOCIATIONS ANNOUNCEMENT BOARD

Did you know that the South African

Regional Meetings Kwa-Zulu Natal: Western Cape: Freestate: Gauteng: Eastern Cape:

26/10/17 07/11/17 20/10/17 24/10/17 27/10/17

Reserve Bank has a secrecy clause? Section 33 of the South African Reserve Bank Act specifically states that nobody at the bank may discuss the workings of the bank with ANYONE except the Minister of Finance. [Read section 33]

www.dcasa.co.za

www.newera.org.za

Our main focus in 2017 is on ensuring that all BDCF members comply with all legislation, regulations and conditions of registration.

We are calling on members to make themselves available to serve on the National Executive Committee. If you are willing and able please post on the Facebook group.

We have already strengthened our communication channels this year and will look to continue to do so. We are excited that special projects are being launched for members and their clients in areas such as incapacitation or death of DCs,usage of PDAs by consumers, as well as fees.

www.bdcf.co.za

www.allprodc.org

CONFEF

Consumer Financial Education Foundation What can Confef do for consumers? CONFEF will provide accessible financial education to consumers through innovative channels. • Conduct financial workshops • Promote Debt Management & Debt Relief Measures • Disseminate financial information on goods and services • Promote savings culture • Promote consumer rights and protection as well as responsibilities What can Confef do for the industry?

For creditors -

• To restore culture of repayments: • Will maintain balance between consumers and creditors rights

For debt counsellors • To promote debt review industry with the aim of addressing negativity around the debt review process; • To encourage consumers to be committed to the debt review process

For Payment Distribution Agencies • To promote the use of PDA’S as a protective measure for consumers.

CAPITEC BANK DEBT COUNSELLING CONFERENCE During September, Capitec Bank hosted a well-attended conference with Debt Counsellors in Stellenbosch. Debt Counsellors from various provinces, including Gauteng, attended and enjoyed the opportunity to engage directly with the bank and key staff members. Capitec Bank pride themselves on being consumer focused and breaking the traditional banking mould. They say they are concerned with helping their clients when they experience financial difficulties. As such, they actively support the debt review process. It was hoped that the day long conference would help enable Debt Counsellors to get a taste of the bankâ&#x20AC;&#x2122;s mindset and processes. The Debt Review Department team were also happy that they could connect with Debt Counsellors directly and discuss any problem areas that need more focus from their side.

TRENDS

Capitec mentioned that they are noticing more and more consumers are entering debt review close to the time of a recent loan. They also find that many times when consumers are under debt review that this status is not showing on the credit bureaus.

Sometimes this can be as high as 20% of matters. Some Debt Counsellors marketing campaigns are confusing to consumers and some Capitec Bank clients who are indeed under debt review have even told Capitec that they were not sure if they were under review and what the implications of debt review are.

Increased Feedback For All DCâ&#x20AC;&#x2122;s

Capitec Bank Debt Review currently track the figures of their Top 10 DCs (based on the value of their book and number of clients). They then report back to these firms regularly to help them see how their clients are performing. This also helps identify trends and possible problems. For example, Recently two of these firms saw their first proposal acceptance drop by over 60% within one month. This was soon identified as a system issue from their side and the matter was sorted out. Over

time Capitec say they will be rolling these reports out to all DCs (as it becomes more automated).

Consumers Must Pay

Only 60% of clients are paying exactly as per their debt review repayment plan (as originally received and agreed to by Capitec). Some clients have even missed a month or two. This is naturally worrying. Some Debt Counsellors and Attorneys pointed out that many Debt Counsellors push clients too hard to fit into the DCRS mould and this can cause problems down the line if they have not helped the consumer budget well enough and make big enough lifestyle changes. Capitec Bank have seen that client account terminations steadily increase over time. The longer a consumer is under debt review the more likely that they will be â&#x20AC;&#x153;terminatedâ&#x20AC;?. This also matches with withdrawals (when consumers no longer want or need debt review). This may point

to poor after care being provided or poor consumer budgeting behaviour. Dr. Steve Harris was invited to speak at the Capitec Conference regarding mental toughness. He discussed how many professional athletes win by less than 1% effort/time/distance. He advised improving everything you do by 1%. After lunch, the audience got to not only hear more information on procedural

matters but also offer suggestions on â&#x20AC;&#x153;hot topicsâ&#x20AC;? such as: how the bank and Debt Counsellors can work closer together and what to do about dodgy call centre sales operations and illegal debt mediation scams. There was also a Questions and Answer session to close out the day. Those attending said they really enjoyed the day and benefitted from the time they spent engaging with Capitec and that they look forward to the next opportunity to do so again.

DEBT COUNSELLING COMMUNITY SUPPORT

WE NEED YOUR SUPPORT DEBT COUNSELLING Help us identify worthy, loyally paying debt review consumers going COMMUNITY SUPPORT through tough times. Letâ&#x20AC;&#x2122;s see how we can help.

We also invite firms and individuals to help through donations. Make sure your funds get used wisely by joining the DCCS family and helping the right consumers get the right help (while they take care of their debt repayments and stay in the process). Nedbank Debt Review are saving dozens of cans of food to donate to DCCS at the end of the year. Why not join them and gather presents, blankets or non perishable foodstuff to be used to assist vulnerable debt review families? Contact admin@dccsupport.co.za.

Check out our website for pictures, stories and more and as always if you would like to get involved in one of our projects (like our back to school project for Jan) then we ask that you simply email admin@dccsupport.co.za

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