By arming themselves with knowledge and adhering to the guidelines provided by reputable associations, consumers stand a better chance of finding authentic support in their debt management journey.
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As South Africans are almost a month into the new year, consumers may be coming to terms with their debt situation and considering their debt options, including debt review.
According to the National Credit Regulator (NCR), debt review is a formal process that was introduced by the National Credit Act (NCA) as a voluntary debt-relief measure to help consumers that are over-indebted.
The National Debt Counsellors’ Association has created a checklist that is designed to help consumers, avoid them being taken in by charlatans and look for a reputable debt counselling company.
Debt counsellors are allowed to and do call consumers to offer their services, according to Benay Sager, chairperson of the National Debt Counsellors’ Association (NDCA).
However, scammers and less reputable people purporting to offer financial services also use phone calls to try and take advantage of vulnerable people.
Sager said: "If you do get a cold call, ask for the number, if it isn’t displayed on your ‘phone, and tell the caller you’ll ‘phone back.
"That will give you time to Google the number or use an app such as Trucaller and check if the caller is who they say they are and from the company they claim to represent."
Check with the debt counsellor where their offices are, regardless of if you get a call or you are proactively looking for a debt counsellor.
Sager said that reputable debt counsellors will have formal premises.
You should ask for the address and whether you can visit the offices if they are located near you. Doing this will help you sort genuine debt counsellors from the scammers.
"By law, debt counsellors cannot take payments directly from creditors for debt counselling purposes. They have to work through a payment distribution agency," Sager said.
There are four PDAs that are registered with the National Credit Regulator (NCR):
- CollectNet
- DC Partner
- Hyphen
- Intuitive.
"Ask the debt counsellor which PDA they use. If a caller says you can make direct payments to them rather than a PDA, alarm bells should ring."
All debt counsellors must be registered with the NCR, according to Sager.
The registration numbers are a combination of letters and numbers, for example NCRDC0000, with the three or four digits at the end being the NCR actual registration number.
The details can be verified on the NCR website: www.ncr.org.za/register_of_registrants/index.html
Ask the debt counsellor for their registration number, then verify this on the NCR database and Google their location.
Check if the company belongs to a professional body or association to make sure that the members stick to industry standards. The membership will often be displayed on the website of the debt counsellor.
"Industry associations such as the NDCA and DCASA exist to improve the standards of service. If the debt counsellor does not belong to a professional association, then this extra layer of protection does not exist," Sager said.
Reputable debt counsellors should be able to clearly explain the debt counselling process and answer any questions as well as concerns you may have, according to Sager.
You can cross check what they tell you with information found on the websites for debt professional bodies.
"They must manage your expectations. For example, they should tell you how long the process typically takes – between three and five years – and that during that time you will not be able to access credit. If their patter sounds too good to be true, it probably is," Sager said.
"They should also be able to tell you what support framework - telephone number, email address, client service resources etc - are in place to guide you through the process."
Sager said that reputable debt counsellors will offer consumers a free assessment which is typically done over the phone, as most consumers prefer the anonymity and convenience of a call. If you prefer, the assessment can also be done in person.
"Be wary of anyone who suggests an outcome or repayment plan to encourage you to sign up for debt counselling before they’ve done a full assessment. Even a basic assessment should include information such as your marital status, income, debt obligations and living expenses," Sager said.
"Good debt counsellors will do a thorough financial assessment, looking at all aspects of your finances and ability to repay your debt. This is the most comprehensive financial assessment done in South Africa and is typically not done by other participants in the financial services industry."
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