How to avoid dodgy debt counsellors and scammers

Stubbornly high interest and inflation rates means that South Africans are finding it harder to make ends meet and feeling the effects of financial stress.

But for many, the prospect of taking action to deal with unsustainable debt repayments is daunting, as they may feel they don’t know who to trust.

The 2023 DebtBusters’ Money Stress Tracker survey found that three out of four South Africans feel money stress, with particularly women admitting to the effects of financial stress at home and work and on their health.

A consequence of this is inaction in dealing with unsustainable monthly debt repayments. The survey found that less than 15% of people took any positive action including seeking help from a debt counsellor.

“This is partially because they don’t know who to trust, or want more time to think, something that is especially true for people aged 45 or over,” said Benay Sager, chairperson of the National Debt Counsellors’ Association (NDCA).

Debt review is a simple debt relief measure and that places a moratorium on the legal action that a credit provider can take against a consumer.

The consumer applies for debt counselling and then the counsellor informs the credit provider about the application. The process involves assessing the consumer’s financial situation and renegotiating the debt with credit providers. 

Benay said the trust issue is somewhat understandable as it’s a daunting decision to effectively put your financial affairs into the hands of a third party for a period of between three and five years.

To assist consumers looking for help to manage their debt, the NDCA has put together the following checklist designed to reassure consumers, prevent them being taken in by charlatans and find a reputable debt counselling company.

Check the number

Debt counsellors are allowed to and do ‘phone consumers to offer their services. Unfortunately scammers and less reputable people purporting to offer financial services also use ‘phone calls to try and take advantage of vulnerable people.

If you do get a cold call, ask for the number, if it isn’t displayed on your ‘phone, and tell the caller you’ll ‘phone back. That will give you time to Google the number – or use an app such as Trucaller – and check if the caller is who they say they are and from the company they claim to represent.

Ask if you can visit their premises

Whether you get a call or are proactively looking for a debt counsellor, ask where their offices are. Reputable debt counsellors will have formal premises. Ask for the address and whether you can visit the offices if they’re located near you. This will help sort genuine debt counsellors from the chancers.

Ask which payment distribution agency (PDA) they use

By law, debt counsellors cannot take payments directly from creditors for debt counselling purposes. They have to work through a payment distribution agency. There are four PDAs that are registered with the National Credit Regulator (NCR) – CollectNet, DC Partner, Hyphen and Intuitive. Ask the debt counsellor which PDA they use. If a caller says you can make direct payments to them rather than a PDA, alarm bells should ring.

Ask for the debt counsellor’s National Credit Regulator registration number

All debt counsellors must be registered with the NCR. The registration numbers are a combination of letters and numbers, for example NCRDC0000, with the three or four digits at the end being the actual registration number. You can verify their details in the NCR website: www.ncr.org.za/register_of_registrants/index.html

Ask which professional debt counselling association they belong to

Ask if the company belongs to a professional body or association, which ensures its members adhere to industry standards. 

Industry associations such as the NDCA and DCASA exist to improve the standards of service. If the debt counsellor does not belong to a professional association, then this extra layer of protection does not exist.

Ask them to explain the process and what support you can expect

Reputable debt counsellors should be able to clearly explain the debt counselling process and answer any questions or concerns you may have. You can check what they tell you on the NDCA website www.ndca.org.za/how-debt-counselling-works/ or those of other professional bodies. The NDCA site also includes a list of commonly asked questions.

Sign up only after a full assessment is done  

Reputable debt counsellors will offer you a free assessment, usually done over the ‘phone, as most consumers prefer the anonymity and convenience of a call. If you prefer it can also be done in person. Be wary of anyone who suggests an outcome or repayment plan to encourage you to sign up for debt counselling before they’ve done a full assessment. Even a basic assessment should include information such as your marital status, income, debt obligations and living expenses.