Debt: Until death do us part

Getting off the debt blacklist has become increasingly difficult, the accredited financial training company Life Empowerment Training Skills has told the Mail & Guardian.

Consumers who genuinely want to get their lives back on track by paying off their debts and clearing their names face inefficient court systems, draconian credit rules and poor service from credit unions.

Reluctant credit providers
When it comes to removing a judgment from a credit record, the first step is to receive a letter from the credit provider acknowledging that the debt has been repaid and that the credit provider consents to the removal or rescission of the judgment. However, some banks refuse to do this.

Standard Bank has a very strict policy in this regard. Although it will issue a letter that the debt has been repaid, it will not automatically consent to the removal of the judgment from the credit bureau’s records.

According to Keith Fuller, director of credit at Standard Bank, the repaying of debt is not enough for the bank to justify the rescission of a judgment. The judgment will, therefore, remain on the system for the full five years after it was issued.

“Each and every request for support in the rescission of judgment is treated on its merits,” said Fuller.

The JD Group also confirmed that it would not issue a letter to rescind judgments unless the judgment had been issued in error. However, it would issue a letter confirming that the debt had been settled. FNB confirmed that it would provide letters to rescind the judgment once the debt had been repaid.

Administrative nightmare
If the client or the agent is fortunate enough to receive the correct documents, they still have to run the gauntlet of the court system. Courts appear to make up rules as it suits them and generally the courts are run with a large degree of chaos.

For example, the Johannesburg Magistrate’s Court will only accept a consent affidavit and no other form of consent, even though the Magistrate’s Court Act only requires that the credit provider put in writing that the judgment may be rescinded—it does not specify in what format this must be. Court files and original documents go missing and then matters cannot be heard until a duplicate file is made.

In the case of the Johannesburg Magistrate’s Court, the original documents have to be requested again, as the court will not accept a “lost original document” affidavit, as some other courts do.

Some courts will only accept originals and not faxed letters from credit providers. And finally, if documents have not been lost, the person with the key is often “on tea” when the case needs to be heard, resulting in a further delay.

If by this stage, the company has managed to get the required permission to rescind the judgment, the credit bureaus can take up to three months to effect the change.

TransUnion’s administration systems, in particular, are said to have led to significant delays and the company often claims that documents have not been received when they have been faxed through.

Trans­Union disputed this claim and said that all faxes pertaining to disputes were received by email, not through a manual fax machine, and that all the faxes received via the email application were up to date.

With regard to the claim that consumers can wait up to an hour for calls to be answered, TransUnion said it had recently launched a new contact centre and website with “enhanced products and services”. It said this would increase capacity and the management of calls.

Lack of communication
Powerhouse said there was a problem with communication between attorneys or debt collectors and creditors.

A consumer might make payment arrangements directly with the creditor; however, the creditor has already handed the matter over to an attorney.

The creditor then neglects to inform the attorney of the payment arrangements and the attorney proceeds with the default listings or legal action.

Some attorneys also insist that the debtor pay them R120 to fax through a letter confirming that the debt has been settled.

A tip for Edgars customers, according to Ian Wood of Edcon, is that all debt collection fees are accrued to the Edgars account.

So, if you want to settle the balance, it will be fully inclusive of all fees. If you settle with the debt collector, there could be additional “receipting” fees.

Should records be expunged?

One would think that the removal of an adverse listing from one’s credit record would be an incentive to pay one’s debts. For many creditors, low-value debts are not worth pursuing and often these debts are written off, so to have the customer voluntarily repay the debt would be a bonus. But there has to be an incentive to the customer for doing so and, in refusing to rescind a judgment, are credit providers not discouraging repayment?

Keith Fuller, director of credit at Standard Bank, believes that repaying a debt that required legal action should not automatically allow the person a clean record. He argues that a judgment is a good indicator of risk and customers who miss payments pose a higher risk; therefore a judgment acts as a warning to other credit providers and is within the spirit of the National Credit Act. However, Standard Bank will provide further credit to a customer they believe has been rehabilitated.

JD Group follows a similar policy, stating that the existence of the judgment is a historical fact which is correctly recorded by the credit bureaus—a fact that credit providers should properly take into account in terms of the Act.

Allister Long of Life Empowerment Training Skills argues that it is because of near reckless lending and often unethical lending practices that consumers find themselves drowning in debt. Yet the credit providers who are quick to issue credit are unwilling to assist when the crunch comes.

Is counselling working?

There have been accusations by the National Credit Regulator (NCR), debt councillors and the banks that no one is playing ball, writes Maya Fisher-French.

There are 115 000 people under debt review, but courts are backlogged by 70 000 cases, some of which will only be heard in 2011. This is a far from ideal situation, both for people struggling with debt repayments and for credit providers who would like to see their money repaid.

According to the NCR and debt councillors, one of the main reasons for the backlog has been the opposition of banks to proposals to restructure their clients’ debt repayments—banks have opposed about 60% of the cases.

Yet the banks say the proposals are unreasonable.

They say many of the repayment arrangements are ridiculous—allowing for, in some cases, 100 years for the debt to be repaid, while the customer was not adjusting his or her lifestyle accordingly.

But agreements have now been reached which should see an improvement in the debt counselling process. Gabriel Davel of the NCR told the Mail & Guardian that a task team has been formed to address issues of debt counselling by setting out rules for all parties.

The team is made up of members of the NCR, the banks and debt counsellors. Davel said more details will be released shortly.
Paul Slot of debt-counselling company Octogen agrees that the debt-counselling process has experienced teething problems. While these were, in part, the result of inexperienced or undertrained debt counsellors, Slot says that in many cases bank staff were undertrained.

This resulted in significant delays, especially with regard to providing certificate of balances, which are required to finalise the debt-counselling application.

A study by Pretoria University showed that credit providers were on average taking 18 days to provide the certificates versus the prescribed five days.

This significantly delayed the process and, if the client had not come to an arrangement within 60 days, the bank could terminate the debt review.

Slot says that, miraculously, the termination notice was the one notice the banks managed to issue on time.

With regard to unrealistic payment periods, Slot says there are sometimes cases where the person will never realistically be able to repay the debt and is unable to apply for sequestration as this costs between R20000 and R50 000. This is a problem that needs to be addressed.

Davel says that South Africa’s sequestration laws need to be reviewed as they are not relevant to the needs of consumers in today’s credit environment.

Slot says, however, that the relationship with the banks has improved and there now appears to be a concerted effort to make the debt-counselling process more successful.

Absa, for example, has outsourced its department responsible for issuing certificates of balance to meet the turnaround times.

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