Understand what debt review is, why it exists, and when you should consider it
Perhaps you have heard the phrase ‘debt review’ but you have never been quite sure what it was all about.
If so, today’s blog is for you.
Join us for a three-part series, as we delve into what debt review is, what it is not and what are the important things you should know about debt review.
“Is debt review a scam?”
“I was placed under debt review without my knowledge!”
“I wanted a consolidation loan, but now I find out I am in debt review!”
These are a few of the complaints I hear as a debt counsellor. However, many grateful consumers have used the debt review mechanism to achieve debt relief. Contrarian responses. So, let’s jump in and understand what it is.
What debt review is
Debt review is a very real, legally based, consumer-friendly solution for over-indebted individuals. It provides debt relief in a situation where debt repayments take so much of a consumer’s monthly income that they are struggling to have a reasonable quality of life, for example; putting food on the table, paying their rent, or paying school fees.
Debt review is not a scam. It originates in the National Credit Act 34 of 2005, as amended, and was developed as a response to addressing exceptionally high numbers of credit consumers who are being caught in a debt spiral.
It is undoubtedly a legislative success story, an innovative mechanism for dealing with a highly indebted consumer population. It remains a relevant and necessary option for overindebted households. In South Africa, 7.7 million or 44%[1] of all credit active consumers are behind on their accounts.
How does debt review work?
The debt review process allows a consumer to appoint a registered debt counsellor to negotiate a restructuring of that consumer’s debt with banks and other credit providers. This occurs if the debt counsellor concludes, following an assessment of the consumer’s finances, that the consumer is over-indebted.
Debt counsellors are registered by the National Credit Regulator, which imposes on them certain compliance requirements and counsellor registration, which must be adhered to. If you decide to use the services of a debt counsellor, make sure they are officially registered by checking on the National Credit Regulator’s (NCR) website www.ncr.org.za/register_of_registrants/registered_dc.php
The results of restructuring a consumer’s debt are lower, more affordable debt instalments. This is achieved by extending the term over which the debts must be repaid and with the credit providers offering to reduce the interest rates on the debt.
Debt review brings together all impacted parties in a convenient way to provide relief for the client while still protecting the rights of the creditors owed money by the consumer. One of the benefits of debt review for creditors is that it stops the consumer from borrowing further.
This is also good for the consumer as it prohibits them from getting into further debt trouble.
Debt review can also, in most cases, be dealt with through the National Consumer Tribunal (“NCT”). Think of the NCT as a specialised online court. They deal with cases where the creditors, consumers, and debt counsellor have agreed on the restructuring plan, which saves both the creditors and consumer legal fees and time as they will not have to appoint attorneys to represent them in court to finalise the restructuring plan.
Hopefully, this has given you a quick insight into what debt review actually IS. Join us for Part II next week where we will continue to answer questions about debt review and look at “What debt review is NOT."
If you are struggling with too much debt and believe Debt Review may be for you, call us at 087 183 5012 or WhatsApp us at 076 451 6944 or email us at info@zenmunni.co.za.
We are registered with the National Credit Regulator and we will partner with you in the debt review process and help you to graduate from debtor to investor so that together, we can improve and build your wealth.
[1] As per the Credit Bureau Monitor issued by the National Credit Regulator - December 2023.
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