Payment distribution agency ordered not to accept new business

The National Credit Regulator (NCR) this week announced that payment distribution agency Consumer Protection Excellence (CPE) may not accept new business.

Unless you’re in debt counselling, you aren’t likely to know what a payment distribution agency (PDA) is.

Debt counselling is a legal process designed to rehabilitate over-indebted consumers. With the help of a debt counsellor, the consumer’s debts are rearranged – after negotiation with their credit providers – so that the consumer is able to meet their monthly obligations and eventually pay off all their debts.

Debt counsellors are not allowed to collect money from consumers and distribute payments to their credit providers. Only PDAs accredited by the regulator can do this.

PDAs derive their revenue from a regulated fee structure as stipulated by the regulator.

They can take three percent of distributable income (the amount that you spend on debt repayments) to a maximum of R500 a month. In addition to paying your instalments over to your creditors, a PDA must also provide monthly statements and payment schedules to your debt counsellor and credit providers, as well as attend to queries from the respective parties.

This week, the regulator announced that it will not be renewing its service level agreement with CPE, one of only four accredited PDAs in South Africa.

The other three are: National Payment Distribution Agency, DC Partner and Hyphen Technology.

The regulator has given CPE until January to wind down its operation.

Kedilatile Malakalaka, the debt counselling manager at the NCR, says the matter is subject to litigation, and that it is too early to comment.

If you are being serviced by CPE, the regulator says your debt counsellor must ensure that your “account” is transferred to one of the other accredited PDAs “with immediate effect” – and consumers would be well advised to make sure this instruction is carried out.