Thousands of over-indebted consumers who thought debt consolidation was the way to go have learnt the hard way that they were better off without debt administrators.
Margaret Matibidi, 35, now earns enough to acquire a bond, but can't get one because of the voluntary administration order hanging over her head.
"Wherever I go, I get reminded that I am under administration and will not get credit until this has been cancelled," said Matibidi.
The single mother of five said representatives from CA Schoeman Administrators visited her workplace in 2001 to advise them about the benefits of debt consolidation and debt administration.
"Their promise to settle all my debts in total while I repay them in smaller instalments enticed me into applying for debt administration," said Matibidi.
She authorised CA Schoeman to debit R400 from her monthly salary, hoping she would manage her finances better.
"But my life turned into a living hell because they never paid my creditors. In December 2005, one mashonisa [money lender], without an appointment, went straight to my employer and demanded my bonus to pay off the money I owed them.
"My African Bank loan shot up by R4000 since CA Schoeman undertook to administer my finances," said a bitter Matibidi.
She now owes African Bank R8000 because her loan has not been serviced for the past five years.
When Matibidi authorised CA Schoeman Administrators to administer her affairs, her debts amounted to R15000, and due to non-payment, they have increased, she said.
CA Schoeman has debited about R25000 from her salary. "But they only paid R84 and R81 to African Bank between December 2003 and April 2004. Other debts were not paid at all," she said.
Thandeka Sono, Matibidi's colleague, said she had paid off all her debts on her own because her creditors kept on harassing her for payment.
"I regret ever having agreed to be placed under administration. I paid off my debts without their help and now I cannot be financially-independent because of this administration order against my name," she complained.
CA Schoeman is still taking her money and have debited R23450 over the past six years without passing it on to the rightful beneficiaries, she said.
David Vos of CA Schoeman Administrators said they were investigating these allegations and would respond by the end of the week.
Malcolm Larsen, chief executive of President Consumer Business Chamber, said section 74 of the Magistrates' Court Act 32 of 1944 allows for the courts "where a debtor is unable to pay any judgment obtained against them in court, or to meet their financial obligations and does not have sufficient assets capable of attachment, to satisfy such judgment or obligations and such amounts are under R50000, then in such a case, the court may make an order providing for the administration of the estate and for the payments of the debts in installments or otherwise.
"Many people are waking up to this fact. They find that they just seem to pay forever, and when they enquire about their balance due, they do not seem to have made any headway," he said.
There are a number of reasons for this.
"Excessive administration fees - the administrator is allowed to charge an amount of 12,5percent plus VAT on all amounts collected. However, many administrators really charge 22,5percent plus VAT. If this is not bad enough, some creditors hand the matter over to their attorneys. So, the administrators make payment to the attorney of the creditor. These attorneys take 10percent plus VAT before paying the creditor.
"It is easy to see how 25 to 30percent of your money goes to people other than your creditors," said Larsen.
"Consumers might, as a result, be paying debts they have no obligation to repay, or at least have a right to dispute," he said.
Apart from the obvious financial implications, there are three other issues that consumers need to be aware of, he said.
"Firstly, if you apply to get out of an administration order by requesting the court to give you a rescission of the order, most administrators themselves object.
"Why? You fund their luxury vehicles. They simply make too much money out of you."
Secondly, though it is your money, many administrators refuse to give you any more information than the total amount that you owe at any one time. They don't like giving details.
Finally there is the issue of mental wellbeing.
"They are controlling debtors' lives by making decisions on their behalf," he said.
Many are better off without debt administrators
Thousands of over-indebted consumers who thought debt consolidation was the way to go have learnt the hard way that they were better off without debt administrators.
Margaret Matibidi, 35, now earns enough to acquire a bond, but can't get one because of the voluntary administration order hanging over her head.
"Wherever I go, I get reminded that I am under administration and will not get credit until this has been cancelled," said Matibidi.
The single mother of five said representatives from CA Schoeman Administrators visited her workplace in 2001 to advise them about the benefits of debt consolidation and debt administration.
"Their promise to settle all my debts in total while I repay them in smaller instalments enticed me into applying for debt administration," said Matibidi.
She authorised CA Schoeman to debit R400 from her monthly salary, hoping she would manage her finances better.
"But my life turned into a living hell because they never paid my creditors. In December 2005, one mashonisa [money lender], without an appointment, went straight to my employer and demanded my bonus to pay off the money I owed them.
"My African Bank loan shot up by R4000 since CA Schoeman undertook to administer my finances," said a bitter Matibidi.
She now owes African Bank R8000 because her loan has not been serviced for the past five years.
When Matibidi authorised CA Schoeman Administrators to administer her affairs, her debts amounted to R15000, and due to non-payment, they have increased, she said.
CA Schoeman has debited about R25000 from her salary. "But they only paid R84 and R81 to African Bank between December 2003 and April 2004. Other debts were not paid at all," she said.
Thandeka Sono, Matibidi's colleague, said she had paid off all her debts on her own because her creditors kept on harassing her for payment.
"I regret ever having agreed to be placed under administration. I paid off my debts without their help and now I cannot be financially-independent because of this administration order against my name," she complained.
CA Schoeman is still taking her money and have debited R23450 over the past six years without passing it on to the rightful beneficiaries, she said.
David Vos of CA Schoeman Administrators said they were investigating these allegations and would respond by the end of the week.
Malcolm Larsen, chief executive of President Consumer Business Chamber, said section 74 of the Magistrates' Court Act 32 of 1944 allows for the courts "where a debtor is unable to pay any judgment obtained against them in court, or to meet their financial obligations and does not have sufficient assets capable of attachment, to satisfy such judgment or obligations and such amounts are under R50000, then in such a case, the court may make an order providing for the administration of the estate and for the payments of the debts in installments or otherwise.
"Many people are waking up to this fact. They find that they just seem to pay forever, and when they enquire about their balance due, they do not seem to have made any headway," he said.
There are a number of reasons for this.
"Excessive administration fees - the administrator is allowed to charge an amount of 12,5percent plus VAT on all amounts collected. However, many administrators really charge 22,5percent plus VAT. If this is not bad enough, some creditors hand the matter over to their attorneys. So, the administrators make payment to the attorney of the creditor. These attorneys take 10percent plus VAT before paying the creditor.
"It is easy to see how 25 to 30percent of your money goes to people other than your creditors," said Larsen.
"Consumers might, as a result, be paying debts they have no obligation to repay, or at least have a right to dispute," he said.
Apart from the obvious financial implications, there are three other issues that consumers need to be aware of, he said.
"Firstly, if you apply to get out of an administration order by requesting the court to give you a rescission of the order, most administrators themselves object.
"Why? You fund their luxury vehicles. They simply make too much money out of you."
Secondly, though it is your money, many administrators refuse to give you any more information than the total amount that you owe at any one time. They don't like giving details.
Finally there is the issue of mental wellbeing.
"They are controlling debtors' lives by making decisions on their behalf," he said.