Debt relief scam alert: how unsolicited calls could trap you in debt review

The National Automobile Dealers’ Association (NADA) is warning South African consumers about a growing financial scam involving unsolicited offers for debt relief.

The schemes are designed to unknowingly enrol individuals into a formal debt review programme, making them ineligible for future vehicle finance.

How the scam works

“South Africans are increasingly receiving unsolicited calls from organisations offering debt relief services. By participating in a brief survey and answering a series of questions with a simple ‘yes,’ consumers may find themselves enrolled in a debt review programme without providing explicit consent,” said Brandon Cohen, NADA Chairperson.

Debt spiral

Debt review plays a significant role in assisting consumers who find themselves in a debt spiral. The decision to enter formal counselling must not be taken lightly, and a range of options also needs to be explored, such as speaking to the banks or a financial advisor.

Legal process

Debt review is a legal process designed to assist over-indebted consumers. It involves a debt counsellor, who gets paid for their service, assessing the applicant’s financial situation and negotiating with creditors to restructure their debt into a more manageable repayment plan. 

“The debt review program, once approved, becomes a court order to which the applicant must adhere until debts are fully settled,” Cohen points out.

The debt review process is not a quick fix and can be protracted, lasting several years, depending on the debt obligations of the consumer.

No credit

During this period, an individual under debt review will not be able to obtain any new credit. This poses a significant problem for those who are unwittingly enrolled, especially when applying for vehicle finance.

Being under debt review also has a lasting impact on an individual’s credit record and credit score. 

Even after the process is complete, a debt review note on a consumer’s credit report can make it difficult to secure new credit at an affordable rate.

Cohen advises consumers to remain vigilant when speaking with agents who offer debt relief services.

“Do not consent to anything you do not fully understand and have had a chance to think about. Make certain debt review is the right option by conducting independent research and only making use of registered debt counselors with a proven positive track record. 

“We also recommend using caller identification software to help avoid these unsolicited calls that can lead to the debt review trap.”