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Beware of debt relief scams

Debt counselling is not a savings plan, regulator warns consumers

Beware adverts on social media that promise to reduce your debt repayments by up to 60% and offer “loan-free debt relief”.

Be very careful of offers of debt relief.
Be very careful of offers of debt relief.

With 49% of South Africans reporting that they have lost their earnings, and one fifth saying their employer is retrenching, increasing numbers of consumers are looking for help in dealing with their debts.

And preying  on the vulnerability of consumers at this time, scammers are offering “debt solutions” all over social media.

Facebook is awash with adverts that promise to reduce your debt repayments by up to 60% and “loan-free debt relief”.

These are generally the work of con artists posing as debt counsellors or dodgy debt counsellors seeking to dupe or entice you into debt counselling.

The National Credit Regulator (NCR) has run public awareness campaigns advising consumers to beware of the “savings of up to 60%” lure.

Debt counselling is not a savings plan, and no debt counsellor can promise to reduce your instalments to creditors by 60%, the regulator has warned.

Click on these ads and you’ll find yourself on a website that typically prompts you to take an online assessment to find out if you qualify for the offering. You don’t have to part with any personal information to take the assessment.

“We will help you to finally become debt free by negotiating with creditors to freeze the interest on your provable unsecured debts,” says one website.

On most of these sites, there is no mention of “debt counselling” and you will find no NCR registration number (a number preceded by the letters NCRDC) for any debt counsellor. Reputable debt counsellors will always display their NCRDC registration number on their websites.

Before engaging with a debt counsellor, you must ask for their NCRDC number and check the regulator’s website (https://ncr.org.za/ under NCR Departments) to see if the debt counsellor is in fact registered or if their registration has been cancelled by the National Consumer Tribunal (NCT) for some or other misdeeds.

Only a registered debt counsellor can put you under debt review. If someone who is not registered charges you a fee to place you in debt counselling this is fraud and you should lodge a complaint with the NCR, the NCT and the police.

Be very careful of offers of debt relief. Debt relief is a mechanism introduced in the latest amendment to the National Credit Act. It is intended to help over-indebted consumers who earn less than R7,500 a month and have unsecured debt of no more than R50,000.

Even if you meet the criteria to apply for debt relief, the commencement date has yet to be announced. When it does commence, you won’t necessarily have your debts extinguished or suspended. Instead, you might be placed in a form of debt review administered by the regulator.

Trudie Broekmann, an attorney specialising in consumer law, says any company promising services that are likely to be impossible to deliver – such as getting debts written off and stopping creditors from chasing you – is breaking the law.

“This type of misleading marketing is prohibited by the Consumer Protection Act (CPA) in at least four different sections of the act. While credit agreements under the NCA are not governed by the CPA, marketing of services are regulated by the CPA.” 

Consequently, anyone can lodge a complaint about misleading marketing with the National Consumer Commission to be sent to Complaints@thencc.org.za, and ask for it to be referred to the NCT for the imposition of a fine of up to 10% of turnover or R1m, whichever is higher, Broekmann says.

“Complaints can, and should, be directed to the NCR, which regulates debt counsellors, to be sent to dccomplaints@ncr.org.za, as well as to the Advertising Regulatory Board (the successor of the Advertising Standards Authority), and anyone can lodge such a complaint.” 

It would be ideal if the complaint with ASA were to be lodged by the NCR itself, she says.