What Is Debt Rescue?

Do you suffer restless nights worrying about your debt? you may be wondering. There is a solution that may assist you in sleeping better at night as you work toward financial freedom! Debt consolidation may be the best option for you. South Africans are struggling to pay their financial responsibilities as a result of the country’s slow economy, aggravated by the Covid-19 epidemic. South African consumers’ outstanding debt levels are likely to continue growing, and credit demand has climbed by 13% over the same time last year. Credit lenders anticipate a rise in delinquencies, defined as debt repayments missed consecutively for more than 90 days, as customers grapple with higher unemployment, fewer working hours, and diminished family budgets. 

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Delinquencies are projected to climb further as the pandemic-induced payment vacations granted by banks and companies come to an end and customers, if they haven’t already, start delving into their credit facilities to fund monthly bills. 

How Debt Rescue Works

The NCR (National Credit Regulator) established debt rescue to assist customers who are over-indebted in managing their finances and adhering to their debt repayment obligations. Debt rescue is a procedure in which a debt counsellor helps you budget and repay your obligations more affordably. Your debt counsellor considers all of your debt and negotiates with creditors to decrease your monthly payment and interest rate, allowing you to pay less each month. A customized repayment plan is created for you, ensuring that you have enough money left over to cover your daily living needs. Once your creditors agree to the new repayment plan, you join the debt review procedure and begin your road toward debt freedom. Creditors will be prohibited from pursuing legal action against you, and the National Credit Act will safeguard your assets. 

Debt Review

Verify that the debt counsellor you are considering is registered with the National Credit Regulator (NCR). Debt review is a procedure in which a debt counsellor evaluates your outstanding debt and, on your behalf, executes a restructured debt repayment plan. Your debt counsellor will create a new monthly payment schedule for you. If you are undergoing debt review, you are legally protected under the National Credit Act (NCA), and creditors are not permitted to do anything you about repaying your debts. Your debt counsellor will handle all conversations on your behalf. 

How Does Debt Review Work

Once you’ve located a debt counsellor with whom you feel comfortable, they will do an evaluation of your current budget. They examine your income, your living costs, and any outstanding debt. 

How can you determine whether you are maybe in over your head in debt? If your current debt payments exceed half of your income, you are likely over-indebted and may benefit from the debt review procedure. Your debt counsellor will get a copy of your credit report to verify your present loan amounts and interest rates and identify areas where they might negotiate reductions with your creditors.  

After reviewing your current budget and creating a new one that you can genuinely afford, they send you an official application form to sign. This is referred to as a Form 16. This will include information about your income and essential expenses and a declaration that you are officially requesting a debt review. 

Additionally, the application form contains the expenses associated with the administration of the procedure and the mandatory legal charge. These costs are not added to your monthly payment since your creditors have agreed that the first two months’ payments would be made to the debt counselor, and the remaining payments will be made starting in the third month. 

After Form 16?

After receiving your completed application form, your debt counsellor will seek copies of your bank statements and identification to submit to your creditors. A notification, referred to as a Form 17.1, is delivered to all of your creditors, informing them that your financial condition is being evaluated. Additionally, this letter requires that your credit providers produce official balances (COBs) certificates to verify the exact amount due based on their records. 

This step results in your listing on the National Credit Bureaus’ (NCR) Debt Help database as evidence that your debt review application has been filed. You are now legally shielded from further legal action by your creditors. On receipt of the COBs from your credit providers ( 5 days later), your debt counsellor will finish their evaluation to establish your degree of over in debt you are. This indicates that you are now unable to satisfy your credit commitments. 

Your debt counsellor will then issue a Form 17.2, your new repayment plan proposal, which will certainly contain substantial interest rate reductions to help you pay down your debt. All credit bureaus are alerted, which essentially puts you under debt review. You will lose access to credit, preventing you from accruing further debt that you will be unable to repay. The payback proposal shows a list of all your credit providers, your current outstanding amounts as determined by the COBs received, the instalments and interest rates given, as well as the new repayment terms. 

After your debt counsellor and credit providers agree on a repayment plan, the issue is presented to the National Consumer Tribunal for a consent order. If one or more credit providers object to this revised repayment arrangement, the issue is referred to a magistrate court. 

The Debt Review Process

The debt review procedure is a legally binding agreement, and you must commit to making your lower monthly payment on a consistent basis. Debt counsellors do not handle the money transfers directly but rather via a Payment Distribution Agency (PDA). PDAs are businesses that transfer your payments to all of your creditors in accordance with your new repayment plan until all of your debt is paid off. The time required to repay your debt can vary depending on the amount owed but is often no more than five years. 

If you are having difficulty making your monthly obligations, contact your debt counsellor immediately. They might submit a change of circumstances report if retrenchments have a negative effect on your income. 

The majority of unsecured loans have credit life insurance, which ensures that your payments are paid in the event of job loss, death, or incapacity. Ascertain that you are aware of the kind of insurance in place. 

Once you have completed your new repayment plan and paid off all of your obligations, your debt counsellor will give you with a clearing certificate. This is sent to all credit bureaus in South Africa and certifies your debt-free status. Your credit report is updated to indicate that you are no longer under debt review, and any bad material is removed from your record. 

Congratulations on reaching this point! it’s a significant accomplishment and a critical step on your path to financial independence. 

More On The NCR

The registration of credit providers, credit bureaus, and debt counselling agencies; the monitoring of the industry to guarantee that all credit firms and their workers abide by the provisions of the National Credit Act; and the enforcement of the Act. 

Each debt counsellor who has completed the debt management course must apply to take the NCR test, which must be passed before the NCR can give the debt counsellor with a registration certificate. As a prospective customer, you have the right to request to read this document, and you should do so immediately. Whether a debt counsellor refuses to provide you with this certificate, you may check to see if they are registered by visiting the National Credit Reporting Agency’s website and doing a search of their records. 

Examining evaluations of debt management companies on prominent review sites such as hellopeter.com and social media might be another approach to determine whether or not it is worthwhile to work with a specific company. 

In order to determine if the organization is really concerned about assisting individuals in improving their financial condition, you need to pay attention to how it handles unfavourable replies and the various types of complaints. Suppose reviews, suggestions, and postings have been blocked (Facebook and Instagram) on social media sites. In that case, this might signal a concern since the firm may be concealing its online ratings and reviews from customers. 

Realise This Is Not A Free Ride Out Of Debt

Prepare yourself for the debt counselling process by being acquainted with it and becoming informed of your rights and duties before engaging in any agreements. You must realize that debt management solutions are not provided at no cost. While you may only be needed to pay a single monthly amount to your debt manager on a monthly basis, the costs for the debt management service are included in the monthly payment amount. The remainder is distributed to your creditors to satisfy your obligations.  

Due to the fact that the National Credit Regulator regulates all debt counselling costs, it is essential to review the standards and compare the prices your debt counsellor charges to verify that pricing is consistent with the suggested rates. 

Review Yourself

Even if you have collaborated with an NCR-registered debt counsellor, you should be proactive and request monthly financial accounts. Importantly, ensure that your monthly debt payback amount and the debt counsellor’s expenses are adequate to reduce your total monthly debt repayments. 

According to the Consumer Protection Act, if a debt counsellor refuses to disclose statements about debt review or other debt solution services with you, you may contact the Credit Ombudsman. Credit Ombudsman confirms its stance: 

“We suggest that the Credit Ombud’s authority extends to situations in which consumers are harmed by credit bureau information and to non-bank credit transactions that violate the National Credit Act and any related Codes. We have the right to examine complaints against subscribing members. The Credit Ombud adjudicates disputes between members of the non-bank credit business (such as microlenders or retail establishments) and customers, but it also conducts free investigations into complaints about credit bureau information. A few years ago, the Credit Ombud was able to examine debt review disputes; however, the situation changed when the debt review Codes were altered, and an agreement was reached between the Credit Ombud and the National Credit Regulator (NCR) that the NCR would handle all debt review problems. As a result, when customers contact the Credit Ombud about debt review difficulties, we are required to report them to the NCR.” 

The Credit Ombudsman shall consider a consumer complaint about the removal of a debt review flag, provided that the following conditions are met: 

  • Consumer followed the credit bureau’s complaints procedure, and the credit bureau’s 20 business days under the National Credit Act had elapsed with the problem being unresolved and/or the consumer remaining unsatisfied with the decision; 
  • If credit bureaus had notified the customer prior to the 20-business day period in writing that they had credible information and hence could not remove the debt review flag; 
  • when the consumer has paid-up letters for each account included in the debt review process, the NCR’s debt assistance system has been updated (we would want confirmation), and the customer has the clearance certificate. 

Final Points

Any competent debt counsellor will gladly give you monthly statements and expense breakdowns. Any counsellor who refuses to provide this critical financial information should raise a red flag. Another essential item to remember is that because you’ve partnered with a debt counsellor does not preclude you from contacting your creditors directly and requesting copies of your statements. Indeed, you should periodically review your creditors’ records to ensure that your payments are being distributed properly by your debt counsellor and are reaching all of your creditors, not just a chosen few.  

Finally, please bear in mind You cannot and are not permitted to seek for additional credit while you are undergoing Debt Review. This implies that you are not allowed to utilize your overdraft, credit cards, retail accounts, or any other kind of debt. If you seek for more credit while you are subject to a Debt Review, your application will be denied.