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Consumer worse off after debt review firm steps in

By Thuli Zungu's Consumer Line | May 09, 2012 | COMMENTS [ 19 ]

A RANDBURG, Gauteng, man has found himself in more debt than he was before going under debt review.

Daniel Mokgopo claims that he has paid R201,174 since March 2008, but his creditors were only paid one or two instalments.

Mokgopo said that he responded to an advertisement which was placed by a debt review company called Debt-wise.

He said he owed school fees, three banks, a car dealership, Woolworths and Edgars a total of R180,000.

Mokgopo said he got further into debt while he going through a divorce because of legal fees.

He said he called a Debt-wise counsellor who promised to help him get the creditors off his back.

During the consultation, he was told that he could not apply for any more credit until his debt was paid. He was also told that he would be given a clearance certificate which would enable him to start afresh with a clean record, he said.

"With Debt-wise's intervention, I had enough money to pay my rent and other living expense until I received my next salary without any hassle," Mokgopo said.

He said his creditors stopped hounding him and he was pleased that he had approached Debt-wise.

"I had approached the company after spotting their advert in Sowetan's classified section and I was relieved that I had," Mokgopo said.

He said they told him he had taken a step in the right direction and assured him that they would get him back on track financially.

"But I am now in a worse situation than I was when I made payments on my own," Mokgopo said.

He earns R7,474 and Debt-wise debited R4,614 from his salary into their account to pay his debts, Mokgopo said.

He said his counsellor collected and distributed the money on his behalf and he trusted the company to act in his best interest.

"But I became suspicious in April last year when I received a letter telling me to attend a court proceeding regarding my debt."

Mokgopo said when he enquired with Debt-wise, he was told that the court wanted to confirm that he was under debt review.

In May 2011, he went to the magistrates court, but the Debt-wise counsellor advised him not to go in the court to listen to the proceedings, Mokgopo said.

"I found this strange because I had been asked to attend," he said.

Mokgopo said his misery began soon after that.

He found out that he still had the horrible credit record that he had tried to clear four years earlier

"My creditors are harassing me and Debt-wise is ignoring my calls," Mokgopo said.

His creditors have now threatened to take legal action against him and he fears that he is going to lose his possessions.

He said his dream of buying a house has been shattered.

Consumer Line spoke to Annelize Groenewald, a liaison officer at Debt-wise, who promised to investigate and comment. She had not done so at the time of printing despite being given five days to respond to Makgopo's claims.

Credit Ombuds Manie van Schalkwyk explained that consumers should always consult debt review companies who are registered with the National Credit Regulator (NCR) when they cannot cope with their debt.

"Consumers should enlist the services of a debt counsellor who is a registered agent from a list provided by the NCR. It is vital that people deal with reputable and legitimate agents," he said. Consumers can call the National Credit Regulator on 0860 627 627 to check whether the debt counsellors they are dealing with are registered.

Van Schalkwyk said consumers who go under debt review must communicate regularly with their debt counsellor to know what exactly is going on. In this way, he said, consumers will know immediately when something goes wrong.

Mokgopo has now forwarded his complaint to the National Debt Mediation Association.

How debt review process works

THE debt review process involves the following:

  • You appoint a debt counsellor who will assess your state of over-indebtedness and review your income and expenses;
  • Upon your qualification for going under debt counselling, the debt counsellor will negotiate a revised repayment proposal on your behalf with your credit providers;
  • There must be an agreement on new repayment proposals with your credit providers;
  • Proposals are not always readily accepted by the credit providers and this may necessitate that the debt counsellor comes up with several proposals to the credit provider before there is agreement by all parties;
  • The debt counsellor must keep you informed of any counter-proposals from the credit provider;
  • Once agreed, a magistrates court will grant a consent order to enforce the proposed repayment;
  • You must stick to the agreed repayment plan as any deviation from this can result in the credit provider terminating the proposal and instituting legal action to recover the debt;
  • Get the services of a reputable debt counsellor who is registered with the National Credit Regulator;
  • Get references from people who have used the services of the same debt counsellor before;
  • Find out whether you have to pay for the debt counsellor's service and how much is payable before you sign up;
  • Check the terms of their contract thoroughly;
  • Ensure that your final proposals are accepted by your credit providers;
  • Check monthly statements of account to ensure that credit providers are receiving payments;
  • Credit providers are within their rights to terminate the proposal at any point in the debt counselling process. But they should send the consumer and the debt counsellor a notice to terminate before doing so;
  • Once you receive the notice, act immediately and enter into further negotiation because in many instances, the credit provider will be prepared to accept a revised payment plan; Importantly, a credit provider cannot terminate the debt review process where a debt counsellor had already referred the review, together with recommendations, to a magistrate's court for consideration;
  • If the credit providers refuse to negotiate a revised payment plan after termination, or there is a dispute regarding the debt counselling process, contact the Debt Credit Association of South Africa or the National Debt Mediation Association for help;
  • If these organisations are unable to help, refer your matter to the Credit Ombud's office for help on 0861-66-2837 or visit www.creditombud.org.za

Call the NDMA on 0861-11-6362 and the DCASA on 0861-43-2272.

COMMENTS [ 19 ]

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Divorce is be very costly. That's why it is not included in the marriage vows...but death is.

May 09, 2012 10:45 | 0 replies

Debts are really arising in some country. Anyway here's a great review I found on Google Search, Care to view their site. http://freedomfromcreditors.com/blog/strategy-for-debt-elimination

Nov 26, 2012 4:43 | 0 replies

Why do you need debt council when you as a debtor should be making your own arrangements with your own creditors, less the admin fee? Sometimes we fail to think logically. Speak to your own creditors before getting debt review. Remember it's not in your creditors interest to have you go under, because once that happens they can kiss the likelyhood of ever getting their money back.

May 16, 2012 4:7 | 0 replies

I feel your pain Sir, but what were you thinking accumulating so much debt with your low income.

May 09, 2012 4:44 | 0 replies

@ Debtfree, eish too much engrish, can you please summarise.

if U say The Creditors are being very nasty to this consumer who obviously is trying to pay off their debt in a responsible way via debt review.

Aren't U guys supposed to see to it that this does not happen. I believe that this guys is paying a certain fee for this service. I don't have de facts but surely is not a free service. What happened to value for money, customer service and satisfaction.

Why would Debtwise approach de old man if they were not going to assist him and why are thay not attending to him now in time of need.

There's too much DEBT going on, debt FREE, debt WISE, u sure U not related entities??

May 09, 2012 3:43 | 0 replies

Debtfree DIGI Magazine:

It seems that there is a communication issue between the Debt Counselling firm and the consumer.
Other than this it does not seem that the consumer is in a worse off position.

There may be several important issues on the Credit Providers side.

One of the most important facts to remember is that consumers do not pay money over to Debt Counsellors each month. The Debt Counsellors do not handle money from consumers.

This (payment of the consumers money) is done by one of 4 registered Payment Distribution Agencies (PDA) who report directly to the National Credit Regulator.

Therefore there can be no doubt that the Debt Counselling firm has not run of with the consumers money. The problem seems to lie with the creditors.

What often happens is that when the Payment Distribution Agencies pay funds to the creditors they do not capture and allocate these funds correctly. Many consumers who go under debt review are discriminated against by their creditors when they suddenly stop getting monthly statements about their accounts. If they did they would soon see if the Creditors were doing their jobs and allocating the payments from the PDAs into their accounts.


As to the bad Credit Record:
In the case of this consumer who says they "still" have a bad credit record: unfortunately even when you make a plan (even through the courts as is the case with debt review) you are still behind on your payments so nothing changes as far as the credit bureaus are concerned. Once again this cannot be attributed to the Debt Counsellor but rather to the consumers bad history of poor payments.

The Creditors are being very nasty to this consumer who obviously is trying to pay off their debt in a responsible way via debt review. Sadly due to a decision by the Supreme Court of Appeal (the Collett Judgment) A creditor can say we do not want you to pay us via debt review and we want to rather sue you and take legal action. That is a legal right they have under law. (Many would say a stupid and counter productive one) Fortunately this consumer has a debt counsellor on their side to help them fight against any such legal harassment and can have a court force the creditor to cooperate.


Sadly this consumer who seems to have received way too much credit in the past has created a situation where their debt is out of control. Fortunately they have a Debt Counsellor to try help them when the Creditors act in an unscrupulous manner.

What is sad to see is how long it is taking the Debt Counsellor to reply to enquiries. This maybe due to them having to wait on information from the Creditors as well as the Payment Distribution Agency.

www.debtfreedigi.co.za



May 09, 2012 2:42 | 0 replies

He was also told that he would be given a clearance certificate which would enable him to start afresh with a clean record, he said.

____________________________________________________________________________
Haa haa haa, I wonder how does the certificate look
more like a Tax clearance cert maybe or somthing like

"Congratulations Daniel Mokgopo" U are now Debt free.

May 09, 2012 2:23 | 0 replies

Some snobs are going to make a fun out of this man's salary. Nxa!!

Here they come
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May 09, 2012 2:7 | 0 replies

Some snobs are going to make a fun out of this man's salary. Nxa!!

Here hey come
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May 09, 2012 2:7 | 0 replies

@MuAfro

u do, but u can still get insurance for ur car even though u dont owe a cent on it, and its cheaper! and I rather drive the bank's car than mine and invest my money on fixed assets!

May 09, 2012 1:18 | 0 replies

A person earning R7,474 gets R180,000 debt how? NCA on affordability is not doing its job.

May 09, 2012 1:15 | 0 replies