# Regulatory Compliance Category > National Credit Act Forum >  Debt counsellors fleecing debtors

## Eugene

The National Credit Regulator is throwing a lifeline to debtors after a flood of complaints highlight the exorbitant fees debt counsellors are charging over-indebted consumers to help them to climb out of the debt trap.

Mpho Thekiso, the project manager of debt counselling at the credit regulator, which was established under the National Credit Act to regulate the credit industry, said her office received about 40 complaints a month about opportunistic debt counsellors. 

Effective since June 1, the Act makes provision for debt counsellors to assist debt-strapped consumers who cannot meet their monthly account repayments and who want to be declared over-indebted and restructure their debt.

"When the debt counsellors are in the process of assisting them (the client), only then do they disclose their fees. Consumers are now wanting to discontinue the service of one debt counsellor and move to another debt counsellor and that's becoming a trend."

Marius Jonker, a legal officer for the Association of Debt Collectors, said some debt counsellors were charging fees comparable to attorney's fees.

"They just say I can charge what I want and they charge as much as attorneys do, plus a 12,5 percent collection commission," said Jonker.

"Advice to consumers is to speak to your debt collector before going in for counselling because you are likely to get a better deal there. 

"The National Credit Regulator is aware of this and the Act will have to be amended," he said.

http://www.iol.co.za/index.php?set_id=1&click_id=594&art_id=vn200711080  62457481C877646

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## Dave A

I've got a member of staff who went to a debt-counselor. His solution was to arrange for a consolidation of debt with Rudco. I suspect a hefty agency commission might have had something to do with it.

She refused the deal because she heard some lurid story about Rudco not actually paying out and being in trouble with the National Credit Regulator (not from me, I promise). It was the last she heard from the debt-counselor. No bill arrived either - at least not so far...

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## Vincent

I was under the impression that debt counsellors were regulated as to how much they could charge, with the fees been as low as R25.00 per session. This was to stop everyone from becoming a counsellor and ripping people off even more.

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## QUINN

Debt counselors under the act should charge a R50 fee.
If you evaluate what they are mandated to do this becomes ridiculous.
On the first meeting they have to obtain a credit profile on the client from at least 3 credit agencies. This a a cost of R20 per report, if the debtor is married COP that would ad an additional R60 bucks.
Now we are at R120 cost and the counselor has not even had a look at the debt.
An income and expense analysis should be drafted and how long can that take? What can you charge per hour for your experience and know how?
If discrepancies are picked up you must correspond with the institutions in writing, sometime again and again......where do you draw the line.
I agree in the case Dave mentioned they should not have referred the lady to Rudco, that is a clear conflict of interest, but in the end debt councilors are consultants in business to make a profit.
If they where appointed and paid by the state what quality of service could you expect

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## Dave A

> If they where appointed and paid by the state what quality of service could you expect


That is a very interesting thought.

At the core of the problem, we've got folk who can't afford to pay their bills and need professional help. In the past this would be done by seeking an administration order and all the costs associated with that system. 

I suspect the theory was that the NCA system would somehow magically bring these costs down. 

Maybe. Maybe not. But it certainly seems to have churned up food for sharks.

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## enyaw

I agree with Quin,
I am a licenced financial services provider (22 yrs), certified estate agent,
e-filing tax practitioner and recently qualified debt counsellor ( due to inadvertently being called upon to assist an ill lady being taken-out by our body corporate i.e arrears levies - leading to a warrant of execution for the attachment of her flat!) - I didn't charge for the service however, I sourced a buyer for her flat and earned a mere 5% commission for the entire service which includes having to deal with all of her debts and arrears matters besides the requisite pschological support.
The fees are prescribed in terms of the NCA - however, their is room for clarity..I don't enjoy the concept of minimal fees for massive effort and don't really believe that a reasonable living could be made. When one speaks of "sharks" - debt counsellors....the NCR actually believes that the "natural person" limitation of licencing in terms of the Act can be easily handled by employing a "team" of clerks under the debt councellor practice to take-up the admin load...I believe this is illusory....the intent of the Act is to have the licenced debt counsellor attending to each client and not "processing" them in a bureaucratic factory and thus they believe that the volumes processed should be sufficiently financially rewarding.....somethings not quite right here.....?
And I've only just begun....what do I charge??The potential overheads, time and aggravation besides the holistic application of my various licences when applied to each individuals situation is worth what??

I have saved thousands for clients by negotiation, does this not count?
Identifying "reckless lending" already amounts to large sums and consequent relief...I note that attorneys are unhappy about the fees....yet what do they charge? One degree = ? Does this not relate to experience?
Comments, welcome....

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duncan drennan (29-Jul-08)

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## Dave A

> ... and recently qualified debt counsellor


There's a question waiting to be asked: What is involved with getting qualified as a debt counsellor?



> ... besides the requisite pschological support.


Definitely an aspect not to be underestimated - you are dealing with people. The prospects of a debt counsellor just extracting the information they need and getting on with the job is pretty remote. You are bound to get all the colour that goes with the territory. And that is time consuming.

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## enyaw

Fairly simple Dave, check the website section 44 through to 46 then check the regulations Part C 10 -of the NCR, attend an approved course - I suggest You and Your Money.org - being partial to NGO's and the potentially altruistic nature rather than an organization working for profit and, they're less expensive - if you don't have a problem with the venue. At the moment it's a one week INTENSE course, mind-blowing having to absorb the NC Act and the regulations, a training manual, and hopefully have some background para-legal/accounting business then, write an exam and achieve no less than 80%. Having managed this, it is only the beginning, which is how I found your site.
I have worked as an independant broker/agent in the Assurance industry for more than 20 years, have learnt a little in dealing with all manner of public - up to Ministerial level...so I believe I'm competent....
Regards,
Wayne

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Dave A (29-Jul-08)

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## Reagen

The NCR advised that the current fees guidlines issued with consulatation with goverment(DTI) Industry, the fees would be evaulated January 2009, news are that the Negotiation Fees will increase by 13%, not sure if this has been approved though.

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## QUINN

Itâs been a very complicated case. Back in March this year, the National Credit Regulator issued a compliance notice, stating that Durban debt counsellor Johan Walter van Zyl of J Walter Legal Forum & Associates had been âbrought to bookâ for failing to comply with the conditions of his registration as a debt counsellor.

At the time, the Regulatorâs head of investigation and prosecutions, Advocate Jan Augustyn, said Van Zyl was defying the conditions of his registration by receiving payment from consumers whoâd gone under debt review with him and paying the monies over to the creditors â thatâs the banks, the retailers etc.

MORE HERE http://blog.ecr.co.za/consumerwatch/?p=318

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Dave A (08-Jun-09)

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## Dave A

Oh lordy!

Now we have PDAs (Payment Distribution Agents) too. Even more fingers in the pie.

How did gov ever think this was going to *reduce* admin costs for over-indebted consumers?

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## SKYDC

I have read this thread and find the questions raised here very interesting and very pertinent.  However, I notice that the posts are quiet old now.  Should you require some views on the questions raised here, let me know, and I will elaborate as best as I can.

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## helpwithdebt

Debt counselors fees are regulated by the Credit Act.

The maximum fee for a single application is R3000 and for a joint application , where the applicants are married in community of property is R4000. Vat excluded if applicable. This fee is inclusive of a R50 registration fee. Every month the debt counselor is entitled to a aftercare fee of 5% of the total amount paid over to all creditors in total but this amount should not exceed R300. The aftercare fee is to ensure monthly that all creditors are paid according to the restructuring agreement and that certain creditors dont receive more than they are owed.

If for instance one agreement is paid up, the counselor must disburse the remaining surplus pro forma between the remaining creditors.

Having said this. The fee of R3000 and R4000 can only be charged if the consumer (client) has that money to spend on debt repayments. For arguments sake. If my client only has R2000 to utilize for paying credit agreements every month my fee cannot exceed that amount of R2000. Regardless of a single or joint application.

Hope this helps

Stefan

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Dave A (24-Mar-11)

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## cappuccino

Understandably so!  However what then is the R300 monthly after management fee for - this fee is for the term of the debt repayments so basically in the end they gain as some accounts could go on for 100 months x R300 = R30000.00 plus depending on payment plan

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## JNel

Could anyone help or let me know how to check up on payments made by Debt Counsellors as per parties listed on the Distribution list.  It seems that some payments made to the Debt Counsellors never get paid over.  Who can be contacted in such a case?

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## Dave A

I'd try contacting people on the distribution list as a start.

From there, if you have reason to believe payments aren't being paid over by the administrator, you can contact the National Credit Regulator.

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## tec0

Well debt counsellors needs a regulating body, and to date I cannot understand why your bank can’t help with debt counselling, after all they are in control of all your money. That said about nearly two years ago, a friend of mine went under debt counselling they phoned around arranged with people that the is under counselling and will pay only an X amount. 

That said they cancelled his car insurance to save money. Now I am sorry but I don’t follow why they recommended it or did it in the first place but they did. So nearly two years later my friend had a car accident. 

A young man skipped a robot for whatever reason and slammed my friend’s car into two other cars. My friend’s car was hit from behind. Naturally the person that caused the accident had no insurance nor did my friend. So what to do? 

My friend phoned his insurance and was told “sorry your debt councillor cancelled your insurance with us” Now I wouldn’t be happy about that because if your job is reliant on your car then that would mean your survival is reliant on your car insurance!!!

Still it is what it is… My advice if you have to go under debt counselling get everything in writing. Every agreement must be signed and agreed to so that you know what you will pay, how much the debt councillor is taking AND identify that you still have car insurance!!!

edit

That said my friend did keep a close watch on the parties he owed money too. He phoned them once a month and requested that they send him a fax showing how much money was paid how much is outstanding and if it is up to date. Yes given that some wouldn’t send him a fax or e-mail so he just visited them once a month and asked for a print out of his outstanding accounts.

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