# Regulatory Compliance Category > National Credit Act Forum >  Ask SKY

## SKYDC

Good Morning

I have noticed that there is a huge interest in matters relating to the NCA, debt counselling and financial matters.  Because the NCA is so new and the case law is developing rapidly, things change rather quickly in this field. I have noticed that the postings are quite old and many of the questions that would have been difficult to answer then can be quite easily answered now.

I am starting this thread to answer any questions that any person may have regarding the NCA, debt counselling or related matters.  I am a registered Debt Counsellor and informing and educating is an important aspect of this role.  Surely I will also learn and grow from these interactions as well.

All the advice offered here is free.  Should you have an issue for which you seek urgent and confidential advice, please feel free to e-mail me at munien@vodamail.co.za.  Thats also free.  I only charge to process debt review applications.

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## Dave A

It would be interesting to hear an NCA angle opinion on the investment or loan question.

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deetee (04-Apr-10)

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## SKYDC

A lease of movable property constitutes a credit transaction if :
- temporary possession of the property is given to the consumer, and
- payment for the possession and use of the property is deferred during the agreement, and
- interest, fees and charges are payable on the amount deferred, and
- at the end of the lease agreement, ownership is granted to the consumer.

The lessor under such a lease is a credit provider and must register if the total value of the lease is over R500 000.

This question though is more about risk.  If the lease is made out to the other business, then that business does not qualify for Chapter 4 Part D of the Act which deals with over-indebtedness.  So should something happen, the other business cannot get protection from the NCA to keep the equipment while defaulting on the lease.  The Act wouldn't apply.

Invest or loan?
Relationships change over time and when things go bad, these issues can get pretty sour.  Maintaining investments in separate entities where possible is advisable for the following reasons :
- each party maintains control of his own investment
- perceptions or allegations of wastefulness or mismanagement of funds are thus avoided
- the transaction can be more focused and structured when done between separate entities
- all of these make adjudication in the event of a dispute easier because there are less grey areas
- in the event of one business failing, the other investment remains intact and immune from liabibility, as well as still being available to generate reward from productive use elsewhere.

The cost would be the administrative burden in maintaining an additional entity.

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Dave A (03-Apr-10)

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## SKYDC

a) A consumer must qualify for the protections granted under debt review, in that he must, on the balance of probability, be proven to be over-indebted.

b) There is no limit placed on the amount of debt that a consumer may have in order to be placed under debt review.

c) No legal action may be instituted against the consumer for 60 business days from the date of his application for debt review. If legal action has already been instituted, these credit agreements must be excluded from any payment proposal.

d) No possessions under the credit agreements under review may be attached or repossessed by the credit provider or his representatives.

e) All credit bureaux are advised of the consumersâ debt review status and no further credit will be granted to the consumer until he is issued with a clearance certificate by any registered debt counsellor.

f) A consumer may not use any credit facility granted to him whilst under debt review.

g) Credit providers may not harass a consumer whilst under debt review and all queries should be directed to the debt counsellor.

h) In order to enjoy the protection of debt review, a consent order must be granted by a Magistrates Court which has jurisdiction in the consumersâ residence and the consumer must adhere to the payment schedule agreed to.

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## SKYDC

Fees charged by Debt Counsellors seem to be a sticky point are there are instances of abuse.  Legislation does not regulate fees and the Debt Counselling Association of South Africa has issued a guideline which Debt Counsellors should adhere to.  If you or anyone you know intends to go under debt review, then check whether the fees charged comply with this guideline.  If they don't, rather seek out a registered Debt Counsellor who will charge these fees or lower.

Also remember that in addition to these fees consumers will pay attorneys fees and monthly Payment Distribution Agency fees.

This is the memo sent out by the Debt Counsellors Association.

*Debt Counselling Association of South Africa.
P O Box 2256
Northriding
2162
Tel: (011) 799 8000*

*Debt Counseling Fee Guidelines*

1. The Debt Counsellor may receive the following amounts in respect of consumers with an individual gross income of more than R2 500.00 per month or household income of more than R3 500.00 per month:

1.1. An application fee, recoverable directly from the consumer upon receiving an application for debt review, limited to the amount prescribed in terms of Schedule 2 (2) of the Act;

1.2. A rejection fee of R300.00 (excluding Vat) in respect of consumers whose applications have been rejected in terms of section 86(7)(a);

1.3. A restructuring fee of the lesser of the first instalment of the debt re-arrangement plan or R3000.00 (excluding Vat), in respect of a consumer whose applications have been accepted in terms of 86(7) (b) or 86(7) (c). (Should a joint application be required the fee can be increased to R4000.00 (excluding Vat)).

The fee is payable as follows:
1.3.1 100 percent of the fee is payable at the first instalment.

1.4. Should a Debt Counsellor fail to summit proposals to Credit Providers or refer the matter to a Tribunal or a Magistrate Court within 60 business days from date of the debt review application the Debt Counsellor has to refund 100% percent of the fee paid by the consumer.

1.5. A monthly after-care fee of 5 percent (excluding Vat) of the monthly instalment of the debt re-arrangement plan up to a maximum of R300 (excluding Vat), for a period of 24 months, thereafter reducing to 3 percent (excluding Vat) of the monthly instalment, to a maximum of R300 (excluding Vat), for the remaining period of the debt re-arrangement plan.

1.5.1. Payment of the monthly after-care fee is to commence in the 2nd month after the amount in 1.3.1 above has been paid.

1.6. Should the consumer withdraw from the process after completing stages 1.3 above a fee equal to 75 percent of the restructuring fee as per 1.3 above is payable by the consumer;

1.7. Legal fees, if and when they occur, may be recovered from the consumer provided the amount of such fees are disclosed up-front to the consumer and agreed to in writing by the consumer.

1.8. The fee structure will be reviewed in January 2009.

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## SKYDC

Most people under debt stress call me to enquire whether I do debt consolidation.  I don't.  However there is a perception out there that this is a responsible way of resolving your debt issues and a means of resolving overindebtedness.  Mathematically debt consolidation does not make sense because if the terms of your credit agreements remain the same (installments, interest, charges and term) and you can only get a comparable interest rate on your new loan, then you're still going to be over-indebted.  However, if you do not wish to make payments to a number of creditors but wish to make just a single payment on the same total debt, then debt consolidation may work for you.

The purpose of debt review is to provide cash flow relief to the consumer by extending the terms of credit agreements.  The industry has developed certain norms, one of which is maximum limits on terms of different types of debt (eg. 36 months for bonds and 84 months for vehicle finance).  Should you be unable to resolve your debt within these periods based on your affordability, then credit providers will consider reducing your interest rate first to prime, then to 0%.  They are not compelled to do so, but most will.  This is effective relief and means most consumers will be able to resolve most debt within five years.

Debt consolidation can achieve same only if you take a long term loan for which the monthly installment is lower that you current monthly debt obligation.  Equity on a bond is a good idea for this.

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AndyD (13-Apr-10)

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## Dave A

> Should you be unable to resolve your debt within these periods based on your affordability, then credit providers will consider reducing your interest rate first to prime, then to 0%.  They are not compelled to do so, but most will.


Wow! Didn't know that. Is it happening much?

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## SKYDC

It does.  Many clients state of indebtedness are severe and the banks will reduce the interest rates in order to get an acceptable plan.

The banks formed the National Debt Mediation Association (www.ndma.org.za) in order to facilitate mediation between debt counsellors / consumers and credit providers.  The NDMA is very effective and they possess a set of rules where interest rate reductions are incorporated in drawing up a payment plan.

One of my clients was retrenched and could not secure enough income to keep his vehicle.  The bank told me to drop the interest rate to 7% and to make the installment 40% of the original installment for the first two years.  This was a good deal.

The deal you get also depends on the Debt Counsellors ability to negotiate on your behalf.  When looking for a Debt Counsellor :
1.  Check the NCR site to verify his registration
2.  Vist the NDMA site to find a Debt Counsellor who is registered with them
3.  I strongly advise against internet debt review.  I have clients who have had terrible experiences and ended up being skimmed for cash with no arrangement being made.  Their finances end up being in a really sorry sate and it becomes difficult to remedy the situation.
4.  Always chose a Debt Counsellor after you meet him / her in person.  Some Debt Counsellors will meet after hours as this is a great convenience for the consumer.  I run my office from home just so I can offer this benefit and I consult with most of my clients after hours.
5.  Always insist on dealing directly with a debt counsellor and check his certificate.  Do not deal with consultants.
6.  The moment a Debt Counsellor says "Don't pay your creditors, pay me"  get a termination letter from him / her and find someone else.  You should not make any payments (except for your R50 application fee) directly to a Debt Counsellor.  It should be done via a Payment Distribution Agency.

I have seen how effective a remedy debt counselling is if it is done correctly and if the consumer participates in the process.

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Dave A (14-Apr-10)

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## SKYDC

If you're interested I have just published a simple website.

http://debtcounsellor.weebly.com/

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## Dave A

Simple, but quite informative and assuring. I like it  :Thumbup:

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SKYDC (14-Apr-10)

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## SKYDC

One of my clients (well, actually all of my clients) had been experiencing debt problems.  The banks were calling him regularly and took his entire salary from his bank account, further exacerbating his situation.  His conversations with the banks were one sided and they were quite unsympathetic to his plight.  He was advised by his bankers that debt counselling was a waste of time and would result in him never getting credit again.  He was petrified.  He became disorientated and detached.  He read about crooked debt counsellors on the news and saw no way out.

We met and spoke.  When the credit provider threathened him with summons, he took the risk and made an application for debt counselling.  I have negotiated a repayment plan for him - which he has been paying to a payment distribution agency for the last two months.  He has had to make some lifestyle adjustments - which he considers a small price for the relief he has got.  The banks all agreed to the new plan the first time round and we are to appear in court to seek a court order very soon.  I prepared all the paperwork and showed it to him.

This client is happy again and full of energy.  He has sufficient cash to live a dignified life and is amazed by the process.  He mentioned to me that when he heard about debt counselling he thought it was too good to be true and therefore must be a scam.  The impression he got from the banks was that his name would be tarnished forever.  He mentioned the stigma attached to debt counselling, and the constant news of crooked debt counsellors didn't do anything to mend the perception.

If you watch Carte Blanche Consumer, you will be familiar with the phrase "If it sounds too good to be true, it probably is".  Take the normal ad for debt counsellors "50% OFF your payments" or "Don't pay for 2 or 3 months".  This sounds too good to be true and is.  Debt counselling does not work like that.  Because it is constructed as a societal remedy for over-indebtedness, the consumers who are the worst off receive the biggest benefits.  If you are over-indebted and struggling with constant anxiety and apprehension, then debt counselling will be of assistance.  Maybe you won't get 50% off your debt, but you'll definitely get a better planned and organised budget and a more affordable repayment plan without any harassment.

What about your credit record?  Well, once my clients debt is paid, I will issue him with a clearance certficate.  The credit bureaux must then remove all record of his review and every negative record on every agreement that was included in the review.  The bank employees create a poor perception of the Act because it is in their interest to do so.  Consumers however, are very sensitive to these perceptions and because we see banks not as businesses, but as institutions in our society we are easily swayed by these perceptions.  Some people never make the application for debt review, and are destroyed by the very banks who shape their perceptions.

I had a counselling session with this client and his family and it led to some very constructive choices.  They are all doing well and the session helped to evaluate values and behaviours that created problems.  Now they are adjusting to a different value system regarding consumption and finances which ensures their happiness.

I like to think that I own a debt counselling pratice, not a debt counselling business.  I would structure it very differently if it were a business.  When done this way debt counselling is a positively life changing remedy for consumers.  Debt Counselling is not a scam.

This said, make sure you don't get scammed by fraudsters out there.  Read the above posts and check out my website before you make any decisions.  When you are vulnerable people will prey on you.  So take a step back, do some research and do what you have to do with someone you trust.

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Dave A (19-Apr-10), sterne.law@gmail.com (19-Apr-10)

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## SKYDC

The news in the past few days reported on the first time that a credit provider had been found guilty of reckless lending in terms of the NCA.  ABSA Bank was the guilty party and the entire loan of R350 000 was set aside by the Magistrates Court.

Reckless lending has been one of the most important provisions of the NCA, yet it has taken almost two and a half years for a credit provider to be found guilty of this practise.  The reason?

Well the Act makes incomplete disclosure on the part of the consumer a complete defence for the credit provider.  Reckless lending is rife in our society, however many consumers lose their protection from the law because they are deliberately dishonest about their finances in order to qualify for a loan.

If you have to lie to get a loan, you probably cannot afford anyway.

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Dave A (02-May-10), sterne.law@gmail.com (04-May-10)

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## murdock

i got into some financial difficulties in july 2007...so i approuched african bank and asked for a cash loan...R10 000...they requested a payslip and ID...i was earning R7000 per month before deductions...clearing R5900 per month...they granted the loan.

then 2 months later i needed more money...so they granted me another loan this time for R13000.00...they requested ID and payslip again still earning only R7000 per month less deductions.

then 4 moths later i went back to the bank and requested another loan...this time for R10 000...they requested a payslip and ID again and this time offered a credit card with a R2000 limit i declined...because i had enough difficulties as it was.

then again 3 moths later again i was drowning in debt so i went back an requested another R9000...they requested a payslip again and ID...the loan was granted...my payslip was still the same as the original R7000

after sorting out all the problems i started paying bank the loans evey month without missing a month.

then a year and half later i got retrench...again...so my problem started again...i couldnt pay the loans back....for 6 months...then after 6 months i got a job...and started paying the loans again...for another 6 months then got retrenched again...so i couldnt pay back the loan....for about 10 months...now a tracing agent contacted me to sign documents which i have done...the outstanding payment is now R65 000 and i am unemployed what do i do?

this is a real life situation but not mine personally

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## SKYDC

Hi

Firstly nobody can compel you to sign any document (uness they have a court order) and in matters like this you should never do so, especially if it is from a tracing agent.

I often hear stories about African Bank and their irresponsible behaviour.  Yours is a case in point.

According to the Act a credit provider is obliged to conduct an assessment of your finances and only grant the credit if the assessment shows that you can afford the repayment.  This is not optional, it is mandatory and the Bank must retain proof of such an assessment.  If the bank does not conduct an assessment, or conducts an assessment which determines that granting the credit will render you over-indebted, and grants you the credit regardless then this is regarded as reckless lending according to the Act.

The Act came into effect on the 01 June 2007.  It seems that your agreements full within the ambit of the Act.

Based on what you have said, I think you have a strong case to claim reckless lending.  My advice would be to visit a good debt counsellor and get expert advice.  Please do so quickly and speak to a DEBT COUNSELLOR, not a consultant or trainee.

Good Luck.

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## murdock

i was with this person today and the phone doesnt stop ringing...they bother him all day with threats of attachment etc...his wife managed to get a job just over a month ago and was fired today...the reason...conflict of interest between the owners of the comapanies wife and his wife...apparently she used a stapler instead of a paper clip and spelt a word incorrectly... so now they are both dont have a job...i think she was on probation but will find out more details...

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