In Debt Review You Don’t ‘Get Off Lightly’ – Don’t Be Duped
While responsible debt counsellors operate within the ethical and professional norms befitting financial services providers, the industry has been tarnished by reports of predatory practices whereby consumers are induced into entering debt review without being fully informed about the conditions or consequences.
Although debt review can be life changing for the truly over-indebted who are willing to make serious sacrifices to clear their debts, it is not to be entered into without a full appreciation of what it entails and certainly not as a way to “get off lightly”.
The problem is that, once you enter the debt review process, it is extremely difficult to extricate yourself from it, as a recent complainant in a case before the National Consumer Tribunal found out. The case involved Ms S, who alleged that a debt counsellor had placed her under debt review after she tried to cancel her application.
Note: You don’t go straight into debt review if you approach a debt counsellor. You have to be assessed and found to be over-indebted and then you have to sign an application form (Form 16) agreeing to the process and its conditions. Between being assessed and signing the form you have the opportunity to cancel the process, but not once you are on the programme. One of the first steps is that you are registered with credit bureaus as being under debt counselling and will not be eligible for new credit for the duration of debt review.
Ms S approached a debt counsellor in August 2024. She agreed to a preliminary monthly repayment amount of R5 000, but when subsequently informed that the amount would be R6 200, she tried to cancel the application. However, she found herself listed as undergoing debt review with credit bureaus.
The tribunal found that, by signing Form 16, Ms S had triggered the statutory debt review process. The Tribunal dismissed the complaint, finding that her attempt to cancel her application did not halt the obligations set in motion by the Act. However, a dissenting judgment highlighted gaps in communication. The dissenting tribunal member, Dr Andisa Potwana, said the debt counsellor had not explicitly informed Ms S of her rights or the conditions imposed on her, including the right to dispute debt-restructuring terms and the inability to cancel the process once she had signed up.
Surge in cold calling
In the case above, the consumer had approached a debt counsellor for debt relief. However, there has been a recent surge in reports of predatory cold calls from debt counselling firms to vulnerable consumers. Often, consumers did not even realise the callers represented debt counselling firms, yet, after giving up some information, found themselves listed by credit bureaus as being under debt review.
A recent circular of the National Credit Regulator (NCR) describes one such case: “The [consumer] was telephonically contacted by a debt counsellor who claimed to offer assistance to government employees in reducing interest rates. Believing it to be an advisory or benefit service, the [consumer] provided financial information but denied knowingly applying for debt review.”
The NCR says that debt review must be entered into with full understanding and genuine consent. If you feel pressured or misled during a debt review process:
• Ask for all documents upfront and read them carefully.
• Get clarity on whether proposed payments are fixed or provisional.
• Know your rights to challenge repayment terms in court or switch to a new debt counsellor.
What to do in the case of a scam
The SA Debt Counsellors Association (SADCA) lists these signs that you may have been duped into debt review without your consent:
• Credit access blocked. Your creditors inform you that you are under debt review when you apply for new credit.
• Unexpected deductions. Regular deductions appear on your bank statements for debt counselling fees.
• Unresponsive counsellor. You cannot reach the debt counsellor, or their contact details lead to dead ends.
The SADCA says you should lodge a complaint with the NCR (https://www.ncr.org.za/index.php/departments/complaints), attaching relevant documentation including a copy of your ID, proof of deductions, and any correspondence.
You also have an option to escalate the matter to the National Financial Ombud Scheme (https://nfosa.co.za/complaints-process/).
Additionally, contact your bank to stop unauthorised deductions and report the scam to your local police station to ensure there is a legal record of the fraud. “This is essential if the case requires criminal investigation,” the SADCA says.
