Reckless credit granting often is a reason why a consumer is over-indebted. A person or a body that grants credit should determine whether the consumer will be able to afford repaying before credit is granted to such consumer. This is done by conducting an affordability assessment. The test for affordability is an objective one. In other words, the person conducting the assessment should on a balance of probability be convinced that the consumer will not be able to make repayments. Reckless credit granting includes the failure by a person or body to conduct an assessment as aforesaid, or concluding an agreement with a consumer who does not understand the cost risk and responsibilities of the credit agreement, or concluding an agreement with a person that will put such person in a state of over-indebtedness.
Reckless credit granting does not apply to a school loan, a student loan, an emergency loan, a public interest credit agreement, a pawn transaction, an incidental credit agreement or a temporary increase in a credit limit under a credit facility.
A debt counsellor has an important role to play when a person’s levels of debt are considered in studying his/her application for debt counselling. This means that a debt counsellor also has to determine whether reckless credit was granted to the consumer, and then the necessary action in terms of legislation has to be taken to protect the consumer if it appears that credit was indeed granted in a reckless manner.
A consumer may get such a certificate only after he/she has paid all debts listed in the debt counselling order or he/she has complied with all short-term credit agreements listed in the order and has only a mortgage loan that is not in arrears according to the agreed terms of the debt counselling.
No. Once an order has been granted, a consumer may stop being under debt counselling only by means of an application for setting aside the order on the grounds of the consumer no longer being over-indebted.
Yes, provided that the necessary forms are completed and the necessary steps are taken in terms of legislation.
Yes, the debt counsellor has to notify the consumer in writing of the intention to suspend the services. The consumer has 10 days to put the matter right, failing which a notice of suspension is issued by way of the necessary form.
Yes, such a transfer may take place at any stage, provided that the debt counsellor fees have been paid and the necessary forms have been completed in terms of the legislation.
Yes, under these circumstances a debt counsellor may recommend a consumer for debt counselling. This often happens in the following circumstances:
Yes, other routes are:
In practice, it often happens that a consumer consults a debt counsellor when it is clear that he/she can no longer meet his/her monthly obligations. Other circumstances are where a person fails to make monthly payments and then receives a letter from a credit provider in terms of section 129 of the Act notifying him/her that there has been a lack of payment and raising the possibility of debt counselling.
During physical or telephone consultation a consumer is informed about the following:
If the consumer wants to proceed with the application when everything has been explained to him/her, the consumer formally applies for debt counselling by completing Form 16 or by furnishing the debt counsellor with all relevant information.
In terms of the applicable regulations and the Act, the debt counsellor has to deliver a duly completed Form 17.1 to all credit providers listed in the application as well as every registered credit bureau within five days after the date of receipt of an application for debt counselling. The reason for this is to notify the credit providers and credit bureaux that a debt counselling application has been submitted by the consumer. The form usually is forwarded electronically to a dedicated email address.
The Act requires the debt counsellor to scrutinise the financial information furnished by the consumer. This is done by requesting a certificate of balance from every credit provider listed in the application. This enables the debt counsellor to determine whether the consumer is over-indebted and also assist in drafting a repayment plan. If the certificate of balance of a creditor is not received within five business days following the date of the request from the debt counsellor, the debt counsellor may assume that the information supplied by the consumer is correct.
The debt counsellor now has to determine, in the prescribed manner and within the prescribed time, whether the consumer is over-indebted This determination has to be finalised within 30 business days from receipt of the application for debt counselling.
This investigation may have one of three outcomes:
In the last-mentioned case (or in the case of outcome 2, should this be recommended by the debt counsellor), the level of over-indebtedness also has to be determined. The application for debt counselling may also be rejected by the forum concerned if debt counselling is not a viable option for the consumer. This would be the case where the consumer is over-indebted to such an extent that he/she will not be able to repay debt within a reasonable period or the consumer has no way of earning an income. In these circumstances, the best option is likely to be one of the alternative remedies, such as sequestration or administration.
A debt rearrangement proposal or a debt restructuring proposal has to be submitted to credit providers within 10 business days following receipt of the certificate of balance.
Within 10 days of receipt of the proposal, the credit provider has to accept or reject the debt restructuring proposal in writing.
If a credit provider or the consumer rejects the plan, the debt counsellor has to consider any objections, proposals and counterproposals made by the parties, and counterproposals could be considered and implemented. If the restructuring proposal is accepted, a final repayment plan is drafted and delivered to the credit providers. If this proposal is accepted, it is made an order of the Magistrate’s Court or certified by the Tribunal. If no agreement is reached and the debt counsellor is of the opinion that the proposal is in the interest of all parties, the Magistrate’s Court may be approached to accept the proposal. Usually, this will be a disputed application which in itself may result in extra expenses.
If the debt restructuring proposal is accepted, the credit providers have to cancel all debit orders and salary deductions with regard to debt repayment. Credit providers also have to update their systems to indicate that the final proposal has been accepted. This is to ensure that the closing balances of debt counsellors and credit providers correspond at the end of the debt restructuring process.
On receipt of the credit providers’ reactions to the debt restructuring proposal the debt counsellor has to do the following:
The Magistrate’s Court has to hear the case. The Court has to make an appropriate order, taking into account the content of the proposal made by the debt counsellor and the information concerning the consumer’s financial means, prospects and obligations.
Once the debt counselling order has been made, the debt counsellor has to continue rendering an aftercare service to the consumer. The debt counsellor is entitled to monthly aftercare service fees, as explained in the section dealing with fees.
The issuing of a certificate that debt has been repaid indicates successful completion of the debt counselling process. In terms of the Act, such certificate has to be issued by the debt counsellor and not by a court.
When a debt counsellor receives a request for a certificate, the circumstances of the debt restructuring have to be investigated and if he/she is satisfied that the obligations in terms of the debt restructuring or the court order have been met, a certificate has to be issued.
A consumer under debt counselling may obtain a certificate in the following circumstances: