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When you are in financial trouble, debt counselling can provide you with a solution that can help you find your way back to financial stability. However, your debt counsellor plays a key role in the process and sometimes the counsellor does not live up to the role they are expected to play, or overstates the extent of their role.
A City Press reader had signed a contract with a legal company in Cape Town that offered him “guaranteed results” and then found that, due to a so-called garnishee order, R1 400 was being deducted directly from his salary. He maintains that there was never any agreement or notice that there would be such an order.
“When I approached the lawyers, I was told that they were still busy processing the investigation and they were sorry about the garnishee order because it was not supposed to be implemented. They blamed human error from their staff, but said nothing could be done to reverse the garnishee order because it was a court order,” he says.
This is just one of the problem areas around debt counselling that the National Credit Regulator (NCR) is seeking to address with the launch of an awareness campaign to educate consumers about misleading debt counselling and credit adverts.
Kedilatile Legodi, manager of debt counselling at the NCR, says it is with concern that the NCR has noted a tendency towards misleading adverts by debt counsellors, in the form of SMSes, emails and phone calls. Legodi says the adverts usually promise a saving of as much as 60% on monthly instalments. “Some debt counsellors, who usually operate call centres, inflate the consumer’s monthly expenses to reduce the amount available to repay debts, when carrying out an assessment. This is unethical, misleading and a misrepresentation of what debt counselling is,”
she says.
Your debt counsellor must first conduct an assessment of your income against your living expenses, such as school fees, groceries and rent or your bond, to determine the amount that can be used to negotiate reduced payments, she explains. “Consumers should be aware that it is incorrect for debt counsellors to promise specified upfront reduction of instalments before conducting a proper assessment.
You are considered to be overindebted if the money you have available after paying your essential expenses is not enough to pay all other debts. Legodi says it is important to note that you have to pay fees to your debt counsellor and these fees must be disclosed to you, upfront and in writing, when you make your initial application to the debt counsellor and before you have signed any agreement.
Legodi also notes that the NCR registers debt counsellors in their natural/individual capacity and not as companies. As a result, only a registered debt counsellor can help you with the debt counselling application. “It has come to our attention that some debt counsellors are using call centre agents and administration staff who are not authorised to offer debt counselling,” says Legodi.
If you receive any misleading SMSes and calls related to debt counselling, you are urged to report them with the names of the debt counsellors or their registration number to the NCR on 0860 627 627 or email dccomplaints@ncr.org.za.
