10 years
Presentation focus Based on my experience over the past (almost) 10 years of debt counselling Challenges Successes Wisdom acquired Not about pointing fingers Hopefully highlight the progress made, lessons learned and areas for improvement.
In the beginning… “Locking in” of consumers prior to NCA Debt counselling born on 1 June 2007 Low numbers of DC‟s vs high demand for debt review Lack of consumer education – applying post summons/judgement Lack of responses to forms 17.1 and proposals High volumes of terminations No court process
Debt Counselling - version 1 Tighten up living expenses Subtract living expenses from income Draft restructure proposals with whatever amount is left 4 schools of thought: Pro rata based on instalment Pro rata based on capital amount Bias in favour of unsecured debt Bias in favour of secured debt Interest rate reductions – zero… prime… 15.5…
Debt Counselling - version 1 Credit providers to cover PDA fees Credit providers not to cover PDA fees Proposal software excluded PDA fees, credit fees and insurance premiums Fees not disclosed on COB‟s - introduced post acceptance/court order
Debt Counselling - version 1 Court No court process Continuous postponements Jurisdiction issues – DC‟s Forum shopping – CP‟s Repossessions DC‟s and CP‟s making it up as we went along
Debt Counselling - version 2 Post declaratory order Differentiation between 86(7)(b) and 86(7)(c) proposals Terminations, removal from roll, opposition Continuous change to the court process postponements Moratorium on terminations the formula
Debt Counselling - version 2 Proposals – interest rate reductions Adjusted to suit each credit provider ○ e.g. Edcon, Direct Axis, Standard Bank Continuous credit provider skirmishes ○ ( always the credit provider‟s fault) ○ Court matter opposed – instalment too high ○ Court matter opposed – consent order application Reason for opposition: “the fact that the credit provider is opposing the application renders it invalid”
Debt Counselling - version 3 Interest rate concessions Understanding this is not a feature of debt review Positive change in attitude towards debt review from credit providers Court backlogs slowly starting to clear Learning from court decisions Understanding our role to be that of an unbiased 3 rd party Learning that the courts looked at debt review from a completely different perspective.
Debt Counselling - version 4 Task Team/CIF Voluntary process agreement DCRS DCRS did we sell out? Terminations & withdrawals DC cannot terminate the process but can a DC reject an application other than per 86(7)(a)? Consumer withdrawals post form 17.2 prior to court order NCT 86(7)(b) vs 86(7)(c) Consumer withdrawals
Successes Debt Counsellors Less confrontational Improved cooperation and support amongst each other Improved relationships with CP‟s Credit Providers Improved cooperation with DC‟s CP‟s going the extra mile to find solutions More supportive of the industry ○ DCRS vastly improved case resolution greater benefits for consumers The Debt Review Awards
Successes NCT More „in tune‟ with debt review Awesome turn-around times Huge effort made to clear backlogs Allows for an up-to-date DC book Consumers Improved knowledge of debt review Applying sooner for help Reduced levels of indebtedness (NCA success)
Successes NCR/CIF A working solution to DHS Improved complaint management Solutions to industry problems Cracking down on unscrupulous industry players DC Associations Controversial at times Credit must be given for the huge positive impact these associations have had on the industry Looking out for the DC Both of these entities should be credited with the successes listed under DC‟s and CP‟s
Challenges The Paradoxical role ○ Neutral, 3 rd party ○ Not the agent nor advocate for the consumer ○ Receives payment from the consumer ○ Is the applicant in court matters with credit providers as respondents ○ Has to resort to soliciting new consumers ○ Is required to reject an application if consumer is not considered over-indebted ○ Does not earn any fees from rejected applications ○ The right behaviours been driven?
Challenges Knowledge DC training inadequate Marketing DC‟s should not need to solicit business ○ Creates a psychological conflict of interest Greater focus needed on consumer education ○ General ○ Credit provider and credit bureau intervention levels
Challenges The need for dispute resolution body ○ CP cooperation is often dependent on current policy – policies change. Compliance with the law should not be policy dependent ○ Disputes between DC‟s & CP‟s arising from differing interpretations of the NCA ○ DC‟s cannot fight court battles against CP‟s ○ Magistrate courts do not set precedent ○ CP‟s have the financial advantage ○ Some examples…
Challenges Disputed interpretations of the NCA ○ Section 78(2) ~ c/a’s excluded from reckless credit A CP claims this section excludes developmental credit from reckless lending assessments. Does that imply that CP is not complying with sections 80 to 82? ○ Section 81(4) ~ the complete defense If a CP establishes that a consumer failed to fully and truthfully answer any requests for information AND a court or Tribunal determines this materially affected the CP‟s ability to make a proper assessment
Challenges Disputed interpretations of the NCA ○ Section 86(10) ~ notice of termination A CP may give notice to terminate the review … [Section 130(1)(a )] … and may approach a court for an order to enforce a c/a if at least 10 days have elapsed since the 86(10) notice was delivered. CP‟s are correctly applying 86(10) but then elect not to proceed with legal enforcement (as is their choice) However, if they do not enforce, they cannot prevent the DC from referring the matter to court (they may oppose) or prevent the consumer from re-applying for debt review in the future. Non referral being used to block a section 86(11) applications
Challenges Disputed interpretations of the NCA ○ Section 88(3) ~ default on order or agreement A CP may not exercise or enforce by litigation or other judicial process any right or security under that c/a until The consumer is in default under the credit agreement And the consumer either defaults on a restructure agreement or defaults on a restructure order ○ Does this section permit a CP to exit debt review without obtaining a judgement? ○ Does this section not clarify that a default under a credit agreement still exists even after a restructure order has been granted? ○ Does a debt restructuring order nullify a pre- existing default?
Challenges Other problem areas ○ Debit order cancellations ○ Credit Bureaux – clearance certificates ○ Section 108 statements ○ Section 103(5) in Duplum (African Bank has got it right) ○ Section 86(5) act in good faith and respond to reasonable requests ○ Section 130(4)(e) CP‟s referring matters to court where the c/a is subject to a restructure order and the consumer has complied with the order
Debt Counselling v5.0? A short term, high impact focus on operational issues A declaratory order to put to rest long- standing NCA disputes – all of them. Consumer awareness and education campaign Development of referral processes from CB‟s & CP‟s to consumers Regulated DC call centre operations Establishment of DC co-operatives
And finally… Respect the role DC‟s have played a phenomenal role in the development of the industry Retire the phrase “debt counselling was never intended to be…” DC‟s have shown an amazing resilience over the past 10 years As an industry we have a lot to be proud of, having taken a “poorly written” NCA and still managed to deliver what debt counselling was intended to do – help consumers.
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