June 2010

The National Credit Regulator's (NCR) set up a task team to address the obstacles in the debt review process and reduce the backlog of cases under debt review. The team is chaired by former Banking Ombudsman, Advocate Neville Melville. The members of the team were selected on the strengths of their knowledge and experience in different aspects of the credit industry and debt counselling. They held detailed discussions with affected parties such as payment agencies, debt counsellors, banks, retailers, magistrates and a range of industry specialists.

The team recognised that debt counselling plays an important role in assisting consumers and highlighted a number of challenges that affect the efficient functioning of the system. They urged that every role player make a concerted effort to address the factors that cause these backlogs. Based on the NCR’s statistics the current position in debt counselling as of March 2010 are as follows:

• 1,642 debt counsellors were registered with the NCR
• 160,000 consumers have applied for debt counselling since the implementation of the NCR, with an average of 7,500 new applications being received per month
• The monthly payments to creditors by consumers under debt counselling increased significantly from R11,05 million in June 2008 to R167.9 million in March 2010.

One of the biggest dangers is that consumers could use debt counselling as an excuse for not meeting their repayment obligations. It is not the intention of the Act to protect such individuals and this behaviour is creating significant risk to mortgage banks, in particular and could promote a culture of non-payment, even amongst high-income consumers.

The following problems were identified:

• A lack of capacity and delays in the magistrate's courts, including uncertainty on the interpretation of the relevant sections of the National Credit Act (NCA) and the difference between the volume of cases finalised and the number of new applications.
• Inefficiency and non-compliance by debt counsellors by accepting applications who do not qualify for debt counselling which are often inconsistent of unreasonable
• A lack of capacity and delays amongst credit providers who are unable to provide accurate certificates of balance to debt counsellors on time
• Problems related to the receipt and distribution of consumer payments as they are often transferred into the wrong account, while opposition to cancelling existing debt orders means that new debt counselling debt orders are often rejected.

The task team has developed a number of policy and behavioural changes which could make a significant improvement in resolving the backlogs for both credit providers and debt counsellors.

An overriding requirement for the successful implementation is for consumers and debt counsellors to approach debt counselling in good faith and ensure that realistic repayments are resumed at the soonest possible date. It is encouraging that the level of commitment that has been displayed by both credit providers and debt counsellors in assessing the problems and in developing proposals to deal with the challenges.

If you would like to gain more insight about the National Credit Regulator’s efforts to ease the debt backlog you can visit www.ncr.org.za to obtain the task teams final documents. You can also contact us on Tel: +27 21 888 6000, or e-mail at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit our website at www.compuscanacademy.co.za.