CityPress - - Business -

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.

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