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U ME and debt U ME and debt Document Transcript

  • 1 | P a g eU | ME and DEBTAn essential self help guide to what youneed to know about debt
  • 2 | P a g eContent1. What is “Debt Counselling”?a. The definition of a debt counsellorb. The main purpose of a debt counsellorc. Objectives of the debt counselor | consumer | creditorsd. Documents required when visiting a Debt Counsellor if you are single or married inCommunity of Propertye. How much will I pay for debt counselling?f. What you need to know and dog. The debt counselling process and time limitsh. What to ask when dealing with a debt counsellori. Debt counselling fees matrixj. What is a clearance certificate?2. What is an “Administration Order”?3. Different Debt arrangements4. What is a “Debt Consolidation Loan”?a. Debt Counselling versus Debt Consolidation5. Reckless credit6. Know Your Rightsa. Repossessionb. Prescribed Debt7. What is a “Credit Bureau”?8. What is a “Garnishee Order”?9. Final thoughts and tips – “How to Save”Annexure - about motivate | today financial wellness solutionsDisclaimer:The content of this book is intended solely for financial wellness and general financial educationinformation purposes. The content does not constitute nor replace any form of financial planning ordebt counselling or debt relief related advice and is not intended to be relied upon by users making (orrefraining from making) any specific financial and/or other related decisions. Appropriate independentfinancial advice should be obtained before making any such financial decisions at all times.motivate | today has used all reasonable endeavours to ensure that the information contained in thispublication is accurate, error free and up to date at the time of producing the book. However, motivate| today cannot warrant that the information does not contain inaccuracies or typographical print errors.Published 01.04.2013 | Formatted by Nigel Willmott CFP® | www.motivatetoday.co.zaAdapted and reproduced with kind permission: My Debt Review
  • 3 | P a g e1. Debt CounsellingDefinition of a Debt counsellorA debt counsellor is anyone who is authorised by legislation to offer assistance to consumers who havedebt-related problems“NCA sec 44 (2): A person must not offer or engage in the services of a debt counsellor in terms of thisAct, or hold themselves out to the public as being authorised to offer any such service, unless thatperson is registered as such in terms of this Chapter.”The main purpose of a Debt Counsellor is to: Act as a mediator between credit providers and indebted consumers. Assess a Consumers state of indebtedness. Facilitate debt re-arrangement with Credit Providers. Make recommendations to Credit Providers and/or Magistrates Court on behalf of overindebted consumers.The overall objectives for the debt counsellor are: Assess the full extent of the debt situation, Assess the consumer’s assets that may be taken into account. Provide a debt remedy that: Provides the consumer with an acceptable standard of living while repaying the debts –this includes retaining the home and a vehicle where possible. Provides the consumer with an agreed, affordable and realistic monthly budget in orderto resolve the situation in the shortest possible time. Provides a repayment scheme acceptable to the consumer’s creditors. Provides a repayment plan that resolves in the shortest possible time. Prevents repossession of assets where possible. Rehabilitates the consumer without detriment for the future. Allows the consumer to get on with their lives.The overall objectives for the consumer should be: To work honestly and openly with the debt counsellor. Declare all assets and liabilities – including all incomes and debts, and including bonuses andsalary increases. To pay the registration and mediation fees as disclosed at the first meeting. To keep in regular contact with the debt counsellor for the full length of the agreement. To agree and commit to the debt remedy – this may include surrendering credit cards, closingaccounts and realising some assets.
  • 4 | P a g eThe overall objectives for the creditors should be: To work with the debt counsellor to assist in the normalisation of the debt. To favourably consider the repayment proposal. To ensure the consumer is assisted in a fair and unbiased way throughout theprocess of repayment. To assist the consumer to rehabilitate as soon as possible.To assist the consumer to restore his/her credit worthiness as soon as possibleDocuments required when visiting a Debt Counselor if you are single or married in COPBefore you visit the debt counsellor you will need to gather together the following documents: Copy of your identity document/passport. A copy of your most recent salary/wage slip (If you receive overtime or allowances thatare not of a regular nature then the last 6 months are required to determine anaverage). A copy of the recent creditor statements and credit cards. A copy of the last two months bank statements for all your bank and investmentaccounts. A copy of the last two months credit card statements for each of your cards. A copy of the latest statement reflecting your home loan balance.A copy of your spouse/partner’s most recent salary/wage slip (if you receive overtime orallowances that are not of a regular nature then the last 6 months’ are required to determine anaverage).Example of how much you will pay for your Debt ReviewIf your household net income is R10000pm and your running expense is R5000 pm and you need topay your creditors R8000pm.RunningexpensesCreditors Term/monthsNew Term NewinstallmentsFood R 2000 Bond 180 R2000 240 R1600Petrol R 1000 Car 48 R1000 60 R 750School fees R 500 Credit card 36 R1000 48 R 500Cell phone R 200 loan 24 R2500 39 R1400Lights andwaterR 800 Over draft 20 R 500 36 R 250Insurance R 500 Furnitureaccount36 R1000 44 R 500Total R5000 Total R8000 R5000The debt counselor has reduced the interest rate, extended the term of the debt and reduced yourmonthly installment.
  • 5 | P a g eWhat the consumer needs to know and do Cancel your debit orders from the credit provider or do stop payments by your bank. Change your bank account for your salary to go into to, preferably with a bank you have nocredit agreements with. It is suggest that a stop order be implemented at your bank for your debt review paymentinstead of debit order; a stop order is treated as cash and distributed to your creditorsimmediately where as a debit order takes up to 15 days before it is distributed to yourcreditors via the PDA. Do not skip payment on your debt review as the creditors could terminate your debt reviewand take legal action. Always speak to your debt counselor if you have problems. Always answer your phone if a creditor phones you, this will prolong legal action takingplace. There are no payment holidays in debt counselling.Debt Counselling process and time limitsSec.86(7)(b)FORMAL/STATUTORYPRELIMINARYPHASE60 DAYSSECONDARYPHASEINSTRUCTPDACONSENT ORDER ONRESTRUCTURED PAYMENTCOURT ORDER ONRESTRUCTURED PAYMENTRESTRUCTURED PAYMENTPDADEBIT ORDER and/or EAO61RECEIVE APPLICATION(5 DAYS)FORM 16FORM 17.1VERIFICATION BY CP(10 DAYS) REG 24(4)2DETERMINATION BY DC(15 DAYS)FORM 17.23PROPOSAL TOCPPROPOSAL TOMAGISTRATE’S COURT4ACCEPT DECLINE5Reg.24(2)Reg. 24(2)&(3)Reg.24(4)Reg. 24(10)Sec. 86(7)(c) (87)?Sec. 86(5)Sec. 138
  • 6 | P a g eImportant to note Once under debt review you only make one monthly payment each month (Paymentdistribution agency). No monies must be paid to debt counsellor only to a payment distribution agency. All debt counselling fees must be paid from the payment distribution agency – normally thefee will be paid from the first payment. By going the debt-counselling route you stand a better chance down the line of gettingcredit (Once paid all negative information regarding your credit record is removed). A good debt counsellor should be able to give you advice as to how you can cut back onyour costs. A consumer may elect an insurer of their own choice – home owners & vehicle cover. A consumer will be entitled to access their credit record at the bureau once a year in themonth of their birth free of charge (R20 thereafter). Claim back costs incurred when rectifying incorrect information held by the bureau.What to ask for when dealing with a Debt Counsellor Ask for a copy of the NCR certificate or the NCR number. Phone the NCR 0860627627 to confirm if the person is still registered. Ask the Debt Counselor which attorneys they use and phone them. Ask them what is their success rate for obtaining consent orders in court. If you deal with a call centre always request to speak to the Debt Counsellor if they don’twant to put you through to the debt counselor go somewhere else. Do not give your personal information over the phone until you know the DebtCounsellor is legit. Find out if the Debt Counselor uses a Payment Distribution Agent, if not don’t use them. Ask for copy of your receipt or a 17.1 that you have applied for debt review. NCA sec 44 (2) A person must not offer or engage in the services of a debt counsellor interms of this Act, or hold themselves out to the public as being authorised to offer anysuch service, unless that person is registered as such in terms of this Chapter. The two main acts to protect the consumer are National Credit Act NCA) and theConsumer Protection Act (CPA). There are two sections that could apply to a Debt Counsellor in the CPA section 40 and41.Unconscionable conduct“CPA sec 40. (1) A supplier or an agent of the supplier must not use physical force against aconsumer, coercion, undue influence, pressure, duress or harassment, unfair tactics or any othersimilar conduct, in connection with any—(2) In addition to any conduct contemplated in subsection (1), it is unconscionable for a supplierknowingly to take advantage of the fact that a consumer was substantially unable to protect theconsumer’s own interests because of physical or mental disability, illiteracy, ignorance, inabilityto understand the language of an agreement, or any other similar factor.”
  • 7 | P a g eFalse, misleading or deceptive representations“CPA sec41. (1) In relation to the marketing of any goods or services, the supplier must not, bywords or conduct—(a) directly or indirectly express or imply a false, misleading or deceptive representationconcerning a material fact to a consumer;”Debt Counselling Fees matrixDebt Counselling Fee Guidelines Approved Fees1. A Debt Counsellor may receive the following fees in respect ofconsumers who have applied for debt counselling:1.1. An application fee, limited to the amount prescribed in terms ofSchedule 2 (2) of the Act, recoverable directly from the consumer uponreceiving an application for debt review;R501.2. A rejection fee of R300.00 (excluding VAT) in respect of consumerswhose applications have been rejected in terms of section 86(7)(a);R300 (excl vat)1.3. A restructuring fee of the lesser of the first installment of the debtre-arrangement plan in respect of a consumer whose applications havebeen accepted in terms of 86(7) (b) or 86(7) (c). Maximum allowable fee for a Single Application (Once off) R6000 (excl vat) Joint Application (Once off) R6000 (excl vat)1.3.1. 100% of the fee is payable at the first installment. Yes1.4. Should a Debt Counsellor fail to submit proposals to CreditProviders or refer the matter to a Tribunal or a Magistrate Court within60 business days from date of the debt review application the DebtCounsellor has to refund 100% of the fee paid by the consumer(excluding the application fee).100%1.5. A monthly after-care fee payable to the DC 5% up to a max of R400 (exclVAT) for the first 24 months,thereafter reducing to 3% toa max of R400 (excl VAT).1.5.1. Payment of the monthly after-care fee is to commence in the 2ndmonth after the amount in 1.3.1 above has been paid.Yes1.6. Should the consumer withdraw from the process after completingstages 1.3 above, a fee equal to 75% of the restructuring fee as per 1.3above is payable by the consumer.Yes
  • 8 | P a g eWhat is a Clearance certificate?A consumer who has settled all his/her debts in terms of a debt restructuring must receive a ClearanceCertificate from the Debt Counsellor. This certificate will allow the consumer to have his/her creditrecord that is held by a credit bureau, cleared. Should a Debt Counsellor refuse to give the consumer thecertificate he/she can approach the tribunal to review the decision of the Debt Counsellor.2. What is an administration order?When someone is in financial trouble and does not qualify for debt counseling, the only option left tothem is the administration order route. It applies to persons who have a total debt of less thanR 50,000.The administrator approaches all of the creditors with a debt repayment plan or proposal afterthe administrator has reviewed the client’s income and expenses. Determination must be made for theclient to still have the means to live. An application is made to court, an administrator is appointed andthe administrator takes over the management of the person’s debt. An Emolument Attachment Order isgranted alongside the Administration Order so as to garnishee the client’s salary/ wage for the monthlydisbursement amount. The administrator will receive the funds from the employer monthly and willdistribute the funds to the creditors on a three monthly basis. There are certain costs by which thegovernment controls administrator costs; however the administrator may charge additional fees tocover expenses. The administrator must resubmit a distribution statement to the court every threemonths. The distribution statement will detail the creditors, the individual distribution amount and thebalance of the accounts with each creditor.What are the issues?The administrator may not always have the most recent creditor updates, which means that the clientmay think that they owe more, when in fact they owe less. The law states that the initial creditors thatwere presented in the original application must be paid up before the addition of new creditors to theorder. This prevents the original distribution amount being spread too thinly between the initialcreditors and the new creditors. However, this is not the case and extends the debt recovery process.The payments to creditors are not made regularly and so creditors may issue an Emolument AttachmentOrder of their own for the debt even though the debt is under administration. Administrators maychange but neither the client nor the creditors may have been informed. Although initially cheaper thandebt counseling, the cost may escalate as the administrators claim expenses. There is no controllingbody for administrators
  • 9 | P a g e3. Different Debt Arrangements (table from NDMA)Voluntaryarrangements AdministrationDebt mediation(DM)Debt counselling(DC)VoluntarySequestrationForcedSequestrationWill it get noted onmy credit recordNot necessarily. Yes Yes Yes Yes YesIf yes, for how long? Until all your debtsare paid off.Until all your debtsare paid off. Then aclearance certificatewill be issuedUntil all your debtsare paid off. Then aclearance certificatewill be issuedUntil you apply for arehabilitation order(usually 3 to 10years)Depends on yoursituation.Do I pay for thesolution?No Yes. The fees areextravaganttherefore thissolution is to beavoidedYes, debt mediatorscharge for thissolutionYes, debtcounsellors chargean upfront fee andan after care feeYes To a degreeFor whom wouldthis solution besuitable?If you have a short-term cash flowproblemClients with totaldebts of less thanR50 000 and noother solution solvesthe problem.Clients who are notthat over-indebted.We are working toexpand this solutionClients who are upto 50% over-indebted.Clients who canoffer creditproviders around20c of every Randand who have ten totwenty thousandRand available forlegal feesClients who arecompletely insolventand who can’t offerthe credit providerany funds.Can I get morecredit?Yes No No No No NoWill I have to sellmy house / assetsNot necessarily Depends on yoursituation but notnecessarilyDepends on yoursituation but notnecessarilyYes, all your assetswill be realisedYes, all your assetswill be realised4. Debt Consolidation LoanA major appeal of consolidation loans is convenience. Instead of paying 20 different creditors who arecharging different rates at different times of the month, you take out one big loan and pay off all thoseaccounts. Then you make a single payment on that loan once a month. But ease doesnt automaticallytranslate to savings.Before you sign on the dotted line, be sure that the costs of the new, bundled loan will truly be less thanwhat youre already paying various creditors. For many consolidation-loan candidates, their currentcredit woes mean they wont get the lowest-available interest rate. Plus, when there is nothing tosecure the loan (such as your home), expect the lender to bump up the rate. Calculate interest and feeson all your existing accounts to determine the total of the payments you now make. Then comparethose amounts with the consolidation loan numbers to make sure it truly is a better choice.
  • 10 | P a g eDebt Counselling Versus Loan ConsolidationDebt Counselling Loan ConsolidationUsing your own money to settle debt Credit provider giving you a loan to settle yourdebtDebt counselor may reduce the interest on youraccount to solve the debt as quick as possibleThe credit provider is more interested to settle thedebt on high interestThe debt under debt review will be shorter The consolidation loan will be a new loan as youwill be paying interest on interest and the termwill be longerThe Debt Counsellor uses the Induplum rule tosolve the debtThe credit providers do not liaise the creditproviders nor do they bring in the induplum ruleYou will be listed on the credit bureaus but whenthe debt is settled the debt counselor will provideyou with a clearance certificateYou won’t be listed but puts you in danger formore loansDebt counselor will assist you with reckless credit The credit provider will just settle the debt and notworry about the reckless loanInduplum RuleDespite any provision of the common law or a credit agreement to the contrary, the amountscontemplated in s 101(1) (b) to (g) that accrue during the time that a consumer is in default under thecredit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under thatcredit agreement as at the time that the default occurs.Once the amounts referred to in s101(1)(b) – (g) that accrue during the period of default, whether or notthey are paid, equal in aggregate the unpaid balance of the principal debt at the time the default occurs,no further charges may be levied.Section 101 – Interest, initiation fee, service fee, credit insurance, default administration charges, andcollection costs.ExampleWhen a consumer takes a loan of R10000 from a credit provider and defaults when the balance isR8000 (default), interest and costs added to the account cannot be more than R16000.
  • 11 | P a g e5. Reckless CreditThe National Credit Act requires that a credit provider must carry out a financial assessment todetermine the extent or amount of credit that a credit applicant can afford before entering into a creditagreement with the applicant. In performing an affordability assessment, a credit provider mustdetermine and take into account the following: whether the applicant has a general understanding and appreciation of the risks and costs of theproposed credit, and of the rights and obligations of a consumer under a credit agreement; the applicant’s debt repayment history; the applicant’s existing financial means, prospects and obligations; and whether the new credit agreement will cause the customer to become over-indebted.If a credit provider fails to do an affordability assessment before advancing credit to someone, the creditprovider could be guilty of entering into a reckless credit agreement.If an agreement is declared reckless it may be fully or partially unenforceable, and the credit providermay lose all or part of the money advanced. The Courts may set aside all or some of the consumer’sobligations to repay the debt under the reckless agreement.NCA 81 (2) Prevention of reckless credit“A credit provider must not enter into a credit agreement without first taking reasonable steps to assess-(a) the proposed consumer’s-I. general understanding and appreciation of the risks and costs of the proposed credit, and of therights and obligations of a consumer under a credit agreement;II. debt re-payment history as a consumer under credit agreements (Example: National loanregister (NLR), Credit bureau checks)”6. Know your rightsRepossessionsA debt collector does not do repossessions they get you to sign a voluntary surrender for your goods,furniture, motor vehicle. Only a sheriff can do repossessions with a court order. The sheriff has todisplay his badge. Most debt collectors act like sheriffs and threaten consumers, this is against the law.Most times furniture stores give you a loan instead of a HP agreement so how can they send a sheriff ordebt collector to pick up your goods on a loan agreement?The debt collectorRequest the “Council of Debt Collectors” certification and identification from the debt collector and hisemployer.
  • 12 | P a g eCouncil of Debt Collectors Act“To provide for the establishment of a council, known as the Council for Debt Collectors; to provide forthe exercise of control over the occupation of debt collector; to amend the Magistrates Courts Act, 1944,so as to legalise the recovery of fees or remuneration by registered debt collectors; and to provide formatters connected therewith.”Improper conduct by debt collectors“15. (1) A debt collector may be found guilty by the Council of improper conduct if he or she, or a personfor whom he or she is vicariously liable (a) uses force or threatens to use force against a debtor or anyother person with whom the debtor has family ties or a familial or personal relationship;(b) acts towards a debtor or any other person with whom the debtor has family ties or a familial orpersonal relationship, in an excessive or intimidating manner;(c) makes use of fraudulent or misleading representations, including(i) the simulation of legal procedures;(ii) the use of simulated official or legal documents;(iii) representation as a police officer, sheriff, officer of court or any similar person; or(iv) the making of unjustified threats to enforce rights;(d) is convicted of an offence of which violence, dishonesty, extortion or intimidation is an element;(e) spreads or threatens to spread false information concerning the creditworthiness of a debtor;(f) contravenes or fails to comply with a provision of the code of conduct contemplated in section 14;”You can lodge a complaint with the Council of Debt Collectors or the Consumer Affairs Board using theCPA.Prescribed DebtD. 3 YEAR PRESCRIPTION PERIOD APPLIES TO:In short, according to the Prescription Act, if, in the past three years you have not made any paymenttowards settling a debt, acknowledged owing the debt in any way – including over the phone – agreedto pay it, or been summonsed in respect of it, it has prescribed, and you can raise this as a defense whenasked to pay it. NOT ALL DEBT PRESCIBES IN THREE YEARS.In respect of any other debt, save where an Act of Parliament provides otherwise.A number of debt collectors and law firms make a living out of buying up ‘debt books’ – debts whichcompanies have written off – and then intimidating the debtors into paying the money, plus whoppinginterest and lawyer’s charges, of course. They rely on the debtors not realising that in terms of the law,debts older than three years have prescribed. Creditors only have three years in which to servesummons on you.
  • 13 | P a g eIn many cases these debts are purchased on spreadsheets with no copies of any agreements - meaningthat there is actually no proof at all of what you owe or that you owe anything at all.1. When buying these debts, they list it on Credit bureaus.2. Debt values are grossly inflated in some cases and interest is charged on interest.3. You have more than one judgment for the same debt.4. They use unregistered debt collectors to sign blank documents (sec57/58) consent to judgment.5. A lot of the debt collectors are not even registered with the council of debt collectors.6. A debt collector who buys books will have other registered debt collectors on the panel that willthen roll the book from one debt collector to the other.7. We have come across debt collectors receiving trace packs for the amount to be collected butthey will inflate the account for their own personal gain.8. They may not list you for old prescribed debts in order to "force" you to pay them.9. They may not inflate debt values and then use intimidating / harassing tactics to force debtorsto pay – Consumers must not sign any acknowledgments –first check it - you might not have topay it.10. Well, what consumers must do is acknowledge the debt – not without first asking for astatement detailing the amount allegedly owing, plus every fee and interest charge. (This is yourright in terms of the Promotion of Access to Information Act, so don’t be fobbed off).11. The consumer must send the debt collector a letter stating this, saying that if he does notreceive a response within seven days, the matter will be considered closed.12. The consumer must keep a copy of the letter because it might be needed if he ever getssummonsed to court over that debt, or gets approached by another debt collector about thesame debt.13. Many of these debt collectors will slot in the prescribed debt into Administration orders, DebtCounselling or have a debt order going off the clients account without the client’sauthorization.In terms of the Prescription Act:A. 30 YEAR PRESCRIPTION PERIOD APPLIES TO:1. Any debt secured by a mortgage bond.2. Any judgment debt.3. Any debt in respect of taxation imposed or levied by or any other law (Municipal rates are a form oftaxation, as are TV licenses and traffic fines).4. Certain debts owed to the state.B. 15 YEAR PRESCRIPTION PERIOD APPLIES TO:Certain debts owed to the state.
  • 14 | P a g eC. 6 YEAR PRESCRIPTION PERIOD APPLIES TO:In respect of debt arising from a bill of exchange or other negotiable instrument or from a notarialcontract.Requesting of documents“NCA (65). Right to receive documentsi. 2(a)make the document available to the consumer through one or more of the followingmechanisms-(i) in person at the business premises of the credit provider, or at any otherlocation designated by the consumer but at the consumer’s expense, or by ordinary mail;by fax, by email or by printable web-pageii. Or deliver it to the consumer in the manner chosen by the consumer from the optionsmade available in terms of paragraph (a).iii. A credit provider must not charge a fee for the original copy of any document required tobe delivered to a consumer in terms of this Act.”Documents to ask for: Copy of the original contract. Copy of the different insurance contract. Breakdown statement with all the charges and interest. The date and amount you have defaulted on an agreement (to establish the Induplum rule). Request a copy of all documents from the debt collector or an attorney and lodge a dispute onthe account to stop legal action taking place. Query you credit bureau states and lodge a complaint with the NCR if you are not happy aboutyour status.“NCA sec 70 (c): take reasonable steps to verify the accuracy of any consumer credit informationreported to it;”7. Credit BureauWhat is a credit bureau?A credit bureau is a company that gathers information and updates each consumer’s credit history. Acredit bureau creates a record of a consumer’s credit information indicating how the consumer manageshis/her credit. The credit bureau supplies these records to credit providers, such as banks, retailers andother credit providing companies. The information indicates each consumer’s payment record. It is alsoused to detect fraud, corruption or theft.When I apply for credit from a credit provider, who decides whether or not I qualify for credit? Whenyou apply for credit, the credit provider uses information received from a credit bureau to assess your
  • 15 | P a g eapplication. When your credit record satisfies the standards of the credit provider, a decision to grantyou credit is made by the credit provider. It is the bank, retailer or credit provider that approves orrejects the credit application and not the credit bureau.What does the Act do?The Act stipulates that each credit bureau must register with the National Credit Regulator in order toconduct business legally; It sets out the purposes for which consumer credit information may be used,and the companies to which the credit bureau may provide the information; It sets out standards fordata accuracy to ensure that information kept by a credit bureau on your record is always accurate; Itensures that each consumer has the right to check his or her record, and that any mistakes arecorrected.What rights do I have?You have the right: to be informed that the credit provider intends to report negative information onyou to a credit bureau before the credit provider actually reports you; to receive a copy of your creditrecord from a credit bureau when you request it. You can get one free record per year, but the creditbureau may charge you a fee for any further records; to challenge information kept by the credit bureauif you are unhappy with the information; for your information to be kept confidential, and for yourinformation to be used only for purposes allowed by the Act.Credit bureau may not list information that may be discriminatory such as information on race,sexuality, political affiliation, medical status, religion or membership with a trade union.What can my credit information be used for?Your credit information can be used: To assess whether or not you can afford credit; To investigatefraud, corruption or theft; To consider you for employment in a position that requires trust and honestyand entails the handling of cash or finances; and To assess whether or not you can afford variousservices.Credit information assists credit providers to assess if consumers will be able to meet their financialobligations. Credit information is of benefit to consumers who are not over indebted and have goodpayment histories. Credit information assists such consumers to get credit, and prevents them frombecoming over-indebted. (Reckless credit NCA 81 (2) Prevention of reckless credit).How can I get a copy of my credit record?You can request your credit record from a credit bureau once a year at no charge, thereafter at a fee ofnot more than R20 per record.Will I be notified before the information is sent to the bureau?For the following information, you will receive 20 business days notice before a credit provider submitsyour information to a credit bureau. During this period, you must inform the credit provider or creditbureau if the information is incorrect: classifications of consumer behavior, such as ‘delinquent’,
  • 16 | P a g e‘default’, ‘slow paying’, ‘absconded’ or ‘not contactable’; classifications related to enforcement actiontaken by the credit provider, such as handed over for collection or recovery, legal action, or write-off.How can I verify that the information held by credit bureau is accurate?You can verify that the information held by a credit bureau is correct by following the steps below:Contact the credit bureau; Ensure that you have your accurate personal information such as your IDnumber and your address; The bureau will send you a form to complete; Complete the form and fax it tothe bureau; The credit bureau may ask you to pay a fee; this must not exceed R20; Inform the bureau ifthere is any inaccurate information on your record, or ask the bureau to explain any information whereyou are uncertain.Can I challenge information kept by credit bureau if I don’t agree with it?YES! If you do not agree with the information held by the credit bureau, you can challenge this andrequest the bureau to correct the information. If they refuse to correct the information, you cancomplain to the National Credit Regulator. The Office of the Credit Information Ombud: The office of theCredit Information Ombud resolves complaints from consumers and businesses that are negativelyimpacted by credit information.8. What is a Garnishee orderThe proper wording is an Emolument attachment order (E.A.O). There are two ways of getting an E.A.Oon your salary, either by means of summons or by a debt collector getting you to sign consent tojudgment known as section 57/58. If it was with a summons, the credit provider would have handedyour debt over to an attorney. The attorney would then have contacted you to try and make anarrangement with you to pay the account. The attorney is mandated to except the offer or proceed withlegal action. If the consumer/debtor refuses to correspond with the attorney then they will serve asummons onto the debt/consumer by means of the sheriff. The debt/consumer has 10 working days torespond to the summons. If the consumer /debtor does not respond, then the attorney will apply tocourt for a judgment. When the judgment gets granted, the sheriff will then serve the E.A.O on theemployer for deductions from the employee’s salary.The 57/58 normally gets used by the debt collectors and attorneys as this is a much easier and cheaperway to get E.A.O granted through court. This is one of the areas where the consumer must be verycareful.Here are some dos and do nots:1. Ask the debt collector for his council of debt collector certificate.2. Always look at the installment and if you are not happy with it, cross it out and put in aninstallment you know you can afford.3. Do not be threaten by debt collector you do have rights.4. Always take his name, ID number and telephone number and use your phone to record yourconversation and take a photo of the debt collector.5. Do not sign the forms if you are not sure as to what you are signing.
  • 17 | P a g e6. About one third of the debt has gone into a prescribed debt status.The following problems government employees are facing with garnishee orders:1. You never signed the section E.A.O.2. No witnesses were present when the E.A.O was signed.3. You signed for prescribed debt.4. Debt was inflated.5. Debt collectors not registered.6. Using the incorrect court to enforce E.A.O.7. E.A.O not served correctly on the employer.8. The employee never received a section 129 notice.9. Debt exceeding the Induplum rule.10. Incorrect Persal number being used.11. Debt collectors acting as sheriffs as some of the files never went through court.12. Loan companies inflating balances before handover to collectors.Question to be asked:The following information needs to be provided to do a proper assessment: Original contract. Copy of amount that was transferred into the bank account. The amount of credit granted. The interest rate. Copy of the section 57/58. Breakdown statement of all transactions from credit provider. Breakdown statement from debt collector or attorneys setting out all fees and costs. The copy of the credit report and the date when assessment was done.1. Ask for original contract of loan or agreement:Asking for the original agreement will assist in the following: Type of agreement: loan, Hp, bond, lease, rental. To establish the cause of action. How the interest rate was calculated. Ask for the voice recording if the loan was done by a call center. To view the fees, credit life, home owners insurance and all hidden cost.NCA (65). Right to receive documentsiv. “2(a)make the document available to the consumer through one or more of thefollowing mechanisms-(i) in person at the business premises of the credit provider, or at
  • 18 | P a g eany other location designated by the consumer but at the consumer’s expense, or byordinary mail; by fax, by email or by printable web-pagev. Or deliver it to the consumer in the manner chosen by the consumer from the optionsmade available in terms of paragraph (a).vi. A credit provider must not charge a fee for the original copy of any document required tobe delivered to a consumer in terms of this Act.”NCA (66) Protection of consumer credit rightI. “A credit provider must not, in response to a consumer exercising, asserting or seeking touphold any right set out in this Act or in a credit agreementII. OR discriminate directly or indirectly against the consumer, compared to the creditprovider’s treatment of any other consumer who has not exercised, asserted or sought touphold such a right, penalise the consumer, alter, or propose to alter, the terms orconditions of a credit agreement with the consumer, to the detriment of the consumer ortake any action to accelerate, enforce, suspend or terminate a credit agreement with theconsumer.”Magistrate court act Section 65J (4) (b) provides for the garnishee or debtor to obtain a statement freeof charge.i. “(b) The judgment creditor or his or her attorney shall, at the reasonable request of thegarnishee or the judgment debtor, furnish him or her free of charge with a statementcontaining particulars of payments received up to the date concerned and the balanceowing.”2. Affordability must be done when taking out a loanNCA 81 (2) Prevention of reckless credit“A credit provider must not enter into a credit agreement without first taking reasonable steps to assess-(a) the proposed consumer’s-III. general understanding and appreciation of the risks and costs of the proposed credit, and of therights and obligations of a consumer under a credit agreement;IV. debt re-payment history as a consumer under credit agreements (Example: National loanregister (NLR), Credit bureau checks”NCA Rule 4 (3) Consent to Judgment“In order that a consent to judgment to be valid, the consent must be signed by the respondent andWITNESSED by two independent witnesses.
  • 19 | P a g eConsent to judgment in terms of section 58 of the Act shall be signed by the debtor and by two witnesseswhose names shall be stated in full and whose addresses and telephone numbers shall also berecorded. When a consumer alleges that he has no knowledge of the judgment then the witnesses canbe contacted to aver that they were indeed present when he signed the consent. If they were not thenthe judgment may be rescinded.”When the section 57/58 is completed, the debt collector or attorney needs to do an affordability studyto see if the consumer can afford the E.A.O installment.3. Copy of statementThis will assist you to establish the following: The date the account went into a default status The hand over amount when the account was handed over to a debt collector or attorney Fees and costs charge by the attorneys and debt collectors. They have to follow the rules setout by the debt collectors council and law society Has the account exceeded the induplum rule SECTION 103 (5) OF THE NCADespite any provision of the common law or a credit agreement to the contrary, the amountscontemplated in s 101(1) (b) to (g) that accrue during the time that a consumer is in default under thecredit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under thatcredit agreement as at the time that the default occurs.Once the amounts referred to in s101(1)(b) – (g) that accrue during the period of default, whether or notthey are paid, equal in aggregate the unpaid balance of the principal debt at the time the default occurs,no further charges may be levied.Section 101 – Interest, initiation fee, service fee, credit insurance, default administration charges, andcollection costs.ExampleWhen a consumer takes a loan of R10, 000 from a credit provider and defaults when the balance is R8,000 (default), interest and costs added to the account cannot be more than R16, 000.Section Mag 65J (4) (b) provides for the garnishee or debtor to obtain a statement free of charge.“(b) The judgment creditor or his or her attorney shall, at the reasonable request of the garnishee or thejudgment debtor, furnish him or her free of charge with a statement containing particulars of paymentsreceived up to the date concerned and the balance owing.”Section 106B of the Magistrate’s Court Act 32 of 1944 provides further:“… any employer who, having been requested by an employee to furnish a written statementcontaining full particulars of such employee’s emoluments, fails or neglects to do so within a
  • 20 | P a g ereasonable time, or who willfully or negligently furnishes incorrect relevant particulars shall be guilty ofan offence and on conviction liable to a fine not exceeding R300 or, in default of payment, toimprisonment for a period not exceeding three months.”4. Request a copy of the section 57/58 which the debtor has signed Upon receipt of a letter of demand or summons claiming an outstanding debt, the defendantmay give an unconditional written consent for judgment in favour of the judgment creditor. Thisis known as a section 58 procedure (Magistrate’s Court Act 32 of 1944).This will allow to establish following Jurisdiction of the courtIn terms of section MCA 65J (1), a judgment creditor may issue an emoluments attachment order in thedistrict where the employer of the judgment debtor resides, carries on business or is employed.NCA of section 90 (2) (k) (vi) (bb)Previously the question of jurisdiction was easily provided for by ensuring the debtor consented to thejurisdiction of the appropriate court. This is no longer the case. The NCA makes specific provisionto limit the choice of jurisdiction. Section 45 of the Magistrates’ Courts Act is specifically excluded andjurisdiction is limited in terms of section 90 (2) (k) (vi) (bb) to “the court where the consumer residesor works or where the goods in question are ordinarily kept”.Furthermore sec 90(2) (k) (vi) (aa) prohibits any credit agreement containing a clause consenting tothe jurisdiction of the high court if the magistrate’s court has concurrent jurisdiction. The oppositeprovision is not precluded as the NCA attempts to decrease the costs arising from the collection process. WitnessesIn order that a consent to judgment to be valid, the consent must be signed by the respondent andWITNESSED by two independent witnesses.Consent to judgment in terms of section 58 of the Act shall be signed by the debtor and by two witnesseswhose names shall be stated in full and whose addresses and telephone numbers shall also berecorded. When a consumer alleges that he has no knowledge of the judgment then the witnesses canbe contacted to aver that they were indeed present when he signed the consent. If they were not thenthe judgment may be rescinded. The debt collectorRequest the “Council of Debt Collectors” certificate and identification from the debt collector and theiremployer.
  • 21 | P a g e(Council of Debt Collectors Act)To provide for the establishment of a council, known as the Council for Debt Collectors; to provide forthe exercise of control over the occupation of debt collector; to amend the Magistrates Courts Act,1944, so as to legalise the recovery of fees or remuneration by registered debt collectors; and toprovide for matters connected therewith.Improper conduct by debt collectors15. (1) A debt collector may be found guilty by the Council of improper conduct if he or she, or a personfor whom he or she is vicariously liable (a) uses force or threatens to use force against a debtor or anyother person with whom the debtor has family ties or a familial or personal relationship;(b) acts towards a debtor or any other person with whom the debtor has family ties or a familial orpersonal relationship, in an excessive or intimidating manner;(c) makes use of fraudulent or misleading representations, including;(i) the simulation of legal procedures;(ii) the use of simulated official or legal documents;(iii) representation as a police officer, sheriff, officer of court or any similar person; or(iv) the making of unjustified threats to enforce rights;(d) is convicted of an offence of which violence, dishonesty, extortion or intimidation is an element;(e) spreads or threatens to spread false information concerning the creditworthiness of a debtor;(f) contravenes or fails to comply with a provision of the code of conduct contemplated in section 14;9. Final thoughts and tips – “How to save money”Set Your Own Personal BudgetThese clever tips help keep your cash where it belongs -- in your pocket! First things first: Learn how toset your own personal budget with our easy-to-use budget planners [see the website for our range ofpersonal budget planners]. Get organized: Gather all important financially-related documents to a central location that isequally accessible to both partners. Track your spending and pay yourself first: Write down where you are spending your money.Re-route some of your spending to a savings account: pay yourself first for a secure financialfuture. Plan to save: Start a savings account to cover expenses like clothes, Christmas/holidays, andinsurance. Plan for future expenses throughout the year. Complete a retirement planningworksheet. Build an emergency fund: You never know when you will need additional cash so try to have twoto three months of living expenses in a readily accessible savings account or money marketaccount. Don’t Go into Debt, and if you are, Get out of debt. If you must use a credit card, control yourcredit card spending and try to pay off any debts you have (e.g., car, credit card, student loan,
  • 22 | P a g eetc.). Pay more than the minimum monthly payment. Once you have paid off your debts/creditcards, take the money and put it towards savings or some other debt. If possible, the goal is tosimultaneously pay off your debt while still putting some amount into savings. Remember, youare loaned money so that you will pay interest and late charges and make other people money. Set goals: Decide what you want to do with your money. Do you want to pay off debts/studentloans? Buy a house? Save for a new car or additional education? Write down your goals andyour strategy for achieving these goals. Write a budget. Review your insurance coverage: Every year, review your health, life, disability,renter/homeowners, auto, and personal liability policies to make sure you are both adequatelycovered. How much should you save and/or invest? Save at least 15% of every dime you earn beginningwith your first job. The older you are the higher the percentage has to go unless you think youcan work forever! Try take-out once a month instead of dining out. Rent a video instead of going to the movies. If you really want to go to the movies, go to theless expensive afternoon “matinee.” Or better yet, go to your local library and borrow books, CDs, videos, and read the latestmagazines and newspapers. Bring your lunch to work once or twice a week instead of buying it. Don’t grocery shop on an empty stomach or you may end up buying more than you need. Cut down food costs by buying what you need on sale, buying generic brands, buying in bulk,and shopping at discount outlets. Don’t buy a sale item or use a coupon just for the sake of it being “cheaper.” Buy an item only ifyou need it! Shop with a list. Increase your gas mileage by taking care of your car with schedule check-ups, or just drive less.Consider carpooling, walking, taking the bus or metro, or riding your bike. Cancel your satellite rental (or at least the premium channels), as well as subscriptions tomagazines and newspapers. Exercise at home rather than joining a gym. Make your own coffee at home rather than buying from a store, or at least cut down thenumber of times per week you purchase coffee. Track your spending and cash – know where every Rand goes! Organize a friend/relative/neighbor swap of clothes, toys, furniture, CDs, etc. Buy clothes for next year at the end-of-season sales – try garage sales and thrift stores. Find a simple hairstyle that doesn’t cost too much to take care of on daily/weekly basis. Take advantage of free entertainment in your community – parks, museums, exhibits, etc. Go tofree park concerts and other community activities. Try to buy with cash, checks, or debit cards. If you use credit cards, get rid of all but one or two,and pay off the balance each month. You can save hundreds or thousands of Rands a year byavoiding credit card interest charges. Always do your grocery shopping with a list of items you need -- and dont buy anything thatsnot on the list. You can save hundreds of Rands a year by avoiding impulse food purchases. Compare unit prices on labels when shopping (for example, price per ounce). You can savehundreds of Rands a year by purchasing items with the lowest price per unit. Avoid shopping at convenience stores. You pay for the convenience -- the prices are usuallyhigher than grocery stores.
  • 23 | P a g eIntroducing – motivate | today Financial Wellness Solutionsmotivate | today provides independent holistic financial wellness training and coaching. The focus isproviding in depth and insightful, life changing workshop based programs to employees of employergroups, members of retirement funds, universities and schools.The unique positioning of motivate | today is that the offer is independent. motivate | today is notaffiliated to, nor supports, any banking, underwriting or advisory institutions. The aim is to empower,uplift and skill everyday people to take charge of their personal financial decision making and choices.Financial wellness programsfor Employers an intensive holistic financial life skills workshop program covering eightmodules aimed at the financial wellness needs of employees;- personal attitudes and understanding of money- understanding your money map of goals and objectives- budgeting and cash flow management- understanding debt and debt recovery plan- accumulating wealth- conversations with our children and family about money matters- continuity of established financial discipline and habits- annual personal financial mastery strategyfor Retirement Funds a workshop based communication program combining financialwellness and retirement fund communication for members ofretirement schemesfor Young adults young adults suitable for Grade 12, College and University levelfor Teens Grade 10 - 11 | transition into teensPersonal financial coaching for individuals and couplesmotivate | today financial wellness workshops do not constitute nor replace financial advice in anyway.Attendees are urged to engage an independent tax consultant/debt counsellor and/ or a suitablyqualified financial planner certified by the Financial Services Board should they require furtherfinancial/debt and/or tax advice and assistance.Enquiries to nigel@motivatetoday.co.zaGo to www.motivatetoday.co.za for more detail about our financial wellness programs and services.