In practise, a consumer will usually consult a Debt Counsellor when he or she realises that they can’t meet their monthly obligations. In other instances, the consumer who has defaulted on payments on a particular credit agreement may receive a letter in terms of Section 129 of the Act from the credit provider that informs them of the default and refers them to a debt counsellor.
How does the process work?
The consumer applies by completing a Form 16 or provides a debt counsellor with the relevant information stipulated in Regulation 24(1)(b). The debt counsellor informs the credit providers and credit bureaus of the application by updating the NCR’s DebtHelp system and issuing Form 17.1.
There after the counsellor verifies the information provided by the consumer and the information received from the credit providers in the form of certificate of balances (COB). The debt counsellor assesses whether the consumer is over-indebted or not. If the consumer is not over-indebted then the debt counsellor must reject the application as set out in section 86(7)(a) and update the NCR DebtHelp accordingly.
Depending on the outcome, the debt counsellor then assesses whether the consumer is eligible for debt review or not. The credit providers and credit bureaus are informed of the decision.
If the consumer qualifies to be placed under debt review, the debt counsellor sends out Form 17.2 to the consumer’s credit providers and credit bureaus and draft a debt restructuring proposal.
After consideration of the debt restructuring proposal by the credit providers, the matter is referred to a Magistrates Court in terms of Section 86(8) of the Act or the Tribunal in terms of section 138 of the Act for an order declaring the consumer over-indebted.
The consequences of a debt review
The credit providers may not enforce the credit agreement against the consumer by taking legal action within the first 60 business days of the consumer’s application for debt review.
The consumer may not incur any further debt while under debt review and they will be listed as having applied for debt review or all registered credit bureaus.
They are liable for the fees that the debt counsellor, attorney and PDA’s may charge. The consumer must adhere to any restructured repayment orders made by the Magistrate’s Court or the Tribunal as the ultimate goal is to repay all shorter-term debts to credit providers and to show future ability to repay mortgage.
A consumer who has applied for debt review can withdraw from debt review only before the declaration of over-indebtedness (Form17.2) has been issued by the debt counsellor. A consumer who has been issued with a clearance certificate or where a court order has been obtained indicating that the consumer is no longer over indebted and no longer under debt review will also be removed from debt review.