TAXPAYERS ON THE LINE
A contentious issue in the proposed bill is that the existing debt counselling network will not be utilised. The department of trade and industry has recognised that it is unaffordable for debt counsellors to service low-income earners, however, a proposal by the Debt Counsellors’ Association of SA (Dcasa) that credit providers subsidise these costs, allowing existing debt counsellors to process debt review for low-income earners, was rejected by the committee.
The current proposal is that government will use its resources to increase funding to the National Credit Regulator (NCR) to provide new offices, staff and systems to cater for the estimated 1.7 million low-income earners who are overindebted.
NCR company secretary Lesiba Mashapa says that the NCR has submitted a business plan to the department of trade and industry that outlines the funding required, however, he is not able to reveal the amount at this stage, nor provide information about how many staff will be employed or how they will access people in rural areas.
In its submission to the committee, the Dcasa estimated that if the NCR was to process 500 000 applications over five years, it would need to process 8 333 applications a
the process is still a long way from being available to consumers, as only once the president has signed the bill will the mechanisms be put in place by the National Credit Regulator, which could take several months to implement.
If a consumer stops paying their instalments before applying for debt relief, the credit provider can take legal action, after which the consumer will no longer qualify for debt relief. So not paying your instalments could see you disqualified automatically.
Furthermore, Lesiba Mashapa, company secretary at the National Credit Regulator, says the same rules under the current debt review process will apply. Under debt relief, low-income earners who are deemed indebted, in other words are unable to pay their debts using their current income, will have their
debts restructured so that they can repay them over 60 months. Where appropriate, the interest rates will be reduced, even to zero in some cases. During the debt review process, the individual may not access any further credit and this will be flagged on their credit records.
Mashapa says that, in cases where the individual has no income, their agreements will be suspended for 12 months, which can be extended for a further 12 months. If they have still not found work after 24 months, the debt can be extinguished. If the debt is extinguished, this information will reflect on the credit bureaus.
Mashapa also warns that strong action will be taken against individuals who falsify information about their income to qualify for debt relief.