/ 19 July 2011

Speak to your creditors before they take legal action

Of the 18.6-million credit-active consumers, nearly half have impaired credit records and are battling to service their debt. The number of consumers with impaired records increased by 20 000 to 8.63-million in March 2011 quarter from 8.61-million in the December 2010 quarter.

“This is happening despite the fact that interest rates are at their lowest in about 30 years”, says Obed Tongoane, manager at the National Credit Regulator (NCR) who says that as at end of June 2011, 257 499 consumers had applied for debt counselling.

“We estimate that there are between 105 000 to 110 000 consumers who are actively under debt counselling with registered debt counsellors. The number fluctuates based on daily applications, terminations, consumers voluntarily surrendering from the process and consumers that have rehabilitated.”

Earlier this year the Supreme Court of Appeal (SCA) ruled on two matters affecting over-indebted consumers. Firstly, the SCA ruled that as soon as a consumer received a Section 129 Notice in respect of a specific agreement, that agreement is excluded from debt review. This means that the creditor has already started legal action, so it is important to deal with your debts before legal action is taken otherwise there is no protection under debt review. Tongoane says the consumer can, however, still apply for debt review in respect of the other agreements were action has not been taken.

The other matter refers to Section 103(5) indicating that all the charges (and not only interest) that accrue while a consumer is in default may not exceed the outstanding amount. From that point in time the credit provider cannot charge any further interest, costs and charges until the consumer has settled anything in arrears. This is an important ruling because many debt administrators where loading heavy fees onto outstanding debts in order to buy pass the induplem rule that limited the amount of interest charged.

Tips to avoid over-indebtedness

  • Start saving today — saving some money every month will assist you in future.
  • Always do a budget and stick to it.
  • Never skip your payments — even when you are under debt counselling, continue making payments, because if you do not pay, you could lose your house or your car.
  • Prioritise your home loan — never skip your mortgage payments.
  • Do not cancel your short term insurance cover. If something happens to the car you may be faced with higher costs than if insured.
  • You have the right to one free credit report annually from registered credit bureaux, utilise this right and know your status.

Consumers who are struggling under the yoke of over-indebtedness can log on to www.ncr.org.za for a list of debt counsellors or alternatively call 0860 627 627 for assistance and advice.