Check out the checklist before choosing a debt counsellor

Check out the checklist before choosing a debt counsellor

Stubbornly high interest and inflation rates and a stuttering economy are making it harder for South Africans to make ends meet and money trouble is a significant cause of stress.

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, such as 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,” says Benay Sager, chairperson of the National Debt Counsellors’ Association (NDCA).

He says this 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. It’s 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

Ask for the debt counsellor’s registration number, then verify this on the NCR database and Google their location.

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. Often the membership is displayed on the debt counsellor’s website.

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 or those of other professional bodies. The NDCA site also includes a list of commonly asked questions.

They must manage your expectations. For example they should tell you how long the process typically takes – between three and five years – and that during that time you will not be able to access credit. If their patter sounds too good to be true, it probably is.

They should also be able to tell you what support framework - telephone number, email address, client service resources etc - are in place to guide you through the process.

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.

Good debt counsellors will do a thorough financial assessment, looking at all aspects of your finances and ability to repay your debt. This is the most comprehensive financial assessment done in South Africa and is typically not done by other participants in the financial services industry.

“Despite what some people believe, South Africa has an effective debt counselling system. Evidence of this is the constantly increasing numbers of consumers who are completing the process. By following this simple checklist, people who need help with their debt can find a reliable and supportive partner who will go the distance with them,” says Sager.

About the National Debt Counsellors’ Association

Established in 2017 the NDCA represents some of the largest and most experienced debt counsellors operating in South Africa and which are able to draw on local and international best practice.

Its aim is to uphold and maintain standards, improve and transform the sector through knowledge sharing and education and inform the public about debt counselling.

Members include National Debt Advisors (NDA), National Debt Counsellors (NDC), DebtBusters, Pioneer Debt Solutions, Meerkat, and My Debt Hero, which collectively make up 50% of the sector in SA. For more information, visit the NDCA website.