Now debt counselling gets a rescue plan

About 92 000 South Africans are more than three months behind in their home loan repayments and are in danger of losing their homes if they don't take action fast.

This was one of many startling snapshots of South Africa's debt crisis which emerged at a media lunch with key figures in the debt counselling industry.

And here's a wider look at that picture - almost half of the more than 18 million South Africans who use credit are finding it difficult to make their repayments.

Ironically, the debt counselling process itself is in crisis for a variety of reasons, the upshot being that some 24 000 cases are bogged down in court; banks are "terminating" the process in the case of many of their clients due to the delays, and going after them legally; and many people under debt counselling are simply not paying as they agreed to.

Despite all the snags, though, an astonishing R214 million is currently being repaid to credit providers every month by people under debt counselling, via so-called payment distribution agents.

Debt counselling is provided for by the National Credit Act as a means of restructuring an overindebted person's debts in a way that enables them to avoid defaulting while still having enough money to pay for essentials.

And to make sure the process doesn't derail completely, the stakeholders have thrashed out a rescue plan in recent months, and are now furiously trying to spread the word to consumers.

And that's what led to the somewhat surreal scenario of a bunch of journalists discussing the way forward for the overindebted with representatives of the Banking Association of SA, the National Credit Regulator and the Debt Counsellors Association, over crayfish and duck in a swish Sandton restaurant.

Central to the rescue plan is a "rules engine" computer program to standardise payment plans - no more will debt counsellors be able to put forward proposals featuring repayments so low that the person would take decades to pay off their debts.

In the hands of debt counsellors, the free program will balance a person's monthly debt repayment obligations with their affordability according to a set of industry defined parameters, then crunch the numbers and come up with a "solution" - a lump sum to be paid every month, to be distributed fairly among the creditors in such a way that all the debts are paid off within five years.

This way, the proposals are consented to by the parties without the matter having to go to court, a process fraught with delays and unnecessary extra expense.

"There are significant concessions being made with regard to interest rates," said Johan de Ridder, referring to home loans.

De Ridder acts as spokesman for the banks on debt counselling issues. Referring to those 92 000 home loans which are in arrears, he said: "It's in everyone's interests to keep those people in their homes."

And debt counselling - especially the new measures - is a viable means of achieving that.

Should a dispute arise between a consumer and a credit provider, the National Debt Mediation Association is tasked with mediating.

The association's services are free and debt-stressed consumers needing advice on the appropriate course of action in their particular situation are invited to call the helpline: 086 111 6362.

And for information about the debt counselling campaign and contact details for banks and registered debt counsellors, go to the National Credit Regulator's website:

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