The debt review process outlined in the National Credit Act comprises the following steps:

1. Consumer approaches a Debt Counsellor when they are unable to honour their monthly repayments on credit agreements in a timely manner.

2. Consumer completes an application form, pays a R57 application fee and provides the Debt Counsellor with a copy of their pay-slip, account statements and bank     statements.

3. Debt Counsellor issues a notification to all creditors and credit bureaus within 5 business days.

4. Debt Counsellor conducts an assessment of the consumer’s over-indebtedness. The consumer must:

• comply with any reasonable requests by the Debt Counsellor to assist the evaluation of her state of indebtedness and the prospects for responsible debt rearrangement; and
• participate in good faith in the review. The Debt Counsellor must complete the assessment within 30 business days after receiving the consumer’s application for debt counseling.

5. If the consumer is not over-indebted, a Letter of Rejection is sent to the consumer, creditors and credit bureaus within 5 business days.

6. If Consumer is over-indebted, the Debt Counsellor has 30 business days to negotiate payment rearrangement proposals with all creditors. Any arrangement the Debt Counsellor makes with creditors must be in writing and signed by all the creditors and the consumer.

7. If this proposal is accepted, the Debt Counsellor must file it as a Consent Order with the Clerk of the Court.

8. If the consumer and/or any creditors reject the proposal, the matter is referred to the Magistrate’s Court.

9. The Debt Counsellor obtains a debit order for the consumer’s reduced monthly payments for a PDA to collect and distribute to the creditors.

It sounds straight forward but in practice DEBT REVIEW is a laborious process as all creditors have to reach an agreement or compromise by accepting lower repayments. It pays to stay in touch with your Debt Counsellor throughout the process and to keep paying your creditors as much as possible while a reduction in payments are being negotiated.

The National Credit Act requires that a credit provider must carry out a financial assessment to determine the extent or amount of credit that a credit applicant can afford before entering into a credit agreement with the applicant. In performing an affordability assessment, a credit provider must determine and take into account the following:

• whether the applicant has a general understanding and appreciation of the risks and costs of the proposed credit, and of the rights and obligations of a consumer under a credit agreement;
• the applicant’s debt repayment history;
• the applicant’s existing financial means, prospects and obligations; and
• whether the new credit agreement will cause the customer to become over-indebted.

If a credit provider fails to do an affordability assessment before advancing credit to someone, the credit provider could be guilty of entering into a reckless credit agreement.

If an agreement is declared reckless it may be fully or partially unenforceable, and the credit provider may lose all or part of the money advanced. The Courts may set aside all or some of the consumer’s obligations to repay the debt under the reckless agreement.

Debt Smart’s fees are set out in accordance with the guidelines provided by the Debt Counselling Association of South Africa.

1. Fees for an individual with gross income of more than R2 500.00 per month or household income of more than R3 500.00 per month:

• An Application Fee of R50 (excluding Vat) upon receiving an application for debt review.
• A Rejection Fee of R300.00 (excluding Vat) in respect of consumers whose applications have been rejected if found that the consumer is not over-indebted.
• A Restructuring Fee of R6000.00 (excluding Vat) for an individual application or R6000.00 (excluding Vat) for a joint application; or the lesser of the first installment of the restructured monthly payment.

The restructuring fee is payable at the first installment of the restructured monthly payment.

Should the Debt Counsellor fail to submit 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.

2. A Monthly After-Care Fee of 5 percent (excluding Vat) of the monthly installment of the debt re-arrangement plan up to a maximum of R400 (excluding Vat), for a period of 24 months, thereafter reducing to 3 percent (excluding Vat) of the monthly installment, to a maximum of R400 (excluding Vat), for the remaining period of the debt re-arrangement plan.

3. Should the consumer withdraw from the process after completing the Restructuring phase, a fee equal to 75 percent of the restructuring fee is payable by the consumer.

4. Legal fees, if and when they occur, are 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.