According to the National Credit Regulator (NCR) of South Africa, many South Africans are under the misapprehension that
debt counseling is a means to escape their repayment obligations. A sentiment shared by three of the big four banks, notes Business Report.
Since the
debt counseling procedure was introduced last year by the NCR, Standard Bank, First National Bank and Nedbank have received 14 500 applications for debt counseling by over-indebted customers, while the NCR has had 8 031.
Most of those who were given the go ahead to receive debt counseling, stopped all their repayments. According to NCR project manager, this indicates that consumers still need to be educated on the process of counseling and debt relief.
Debt counselors need to be more open with their consumers and explain the process upfront. The debt counseling process does not prevent a creditor from pursuing the funds owed to them, as the debt counselor works only with the creditor and not the provider. The credit providers though, cannot take legal action against the creditor during the process.
The first action that counsellors advise creditors to take, according to the statistics, is cancellation of debit orders and manual payments to their credit providers.
Standard Bank alone received 5,000 credit application which involves 12,000 accounts.
Nedbank received more than 5,000 applications and 6,400 affected credit arrangements.
FNB says 4,500 applicants have been put on debt counseling and were being rearranged.
ABSA recommends that debt-counseled debtors were not obliged to make payments until the rearrangement solution was worked out and agreed by the courts. ?Cancellation