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Even in over-indebtedness, there is hope

Even in over-indebtedness, there is hope

The pandemic has compelled the world to reassess, focus and take stock of everything, from the way we live, to the way we work, to the general perception and value of life. The stark reality is that the economy has been hard hit to the point that many businesses have had to either scale down or in some instances close their doors. This has brought the realization that no country or city is immune to change. With the rise in retrenchments, consumers are under pressure to meet the demands of their financial commitments.
In the midst of uncertainty there is a glimmer of hope as the National Credit Act (NCA) has made provision for over-indebted consumers. The Credit Ombud advises consumers not to wait until matters get worse and default on an agreement, before engaging with their credit grantors about their financial circumstances.

The NCA sets out certain options for consumers if they are over-indebted such as;

1. Consumers may negotiate lesser installment amounts with their credit providers when experiencing financial constraints although it must be noted that the credit provider is not obliged to accept such an offer. Depending on the personal financial circumstances of the consumer, including how the consumer maintained payments on the account prior to the financial crisis, the parties may agree to restructure the agreement. Do note, that should a lesser amount be paid than what was agreed upon in terms of the original credit agreement, then considering what is debited to the account as a result of interest and costs, the loan repayment term may be extended and it may be found that the outstanding balance does not actually reduce. One must take into consideration that paying a low monthly installment would result in a minimal amount, if any, toward the capital amount outstanding, resulting in additional interest accumulating. Credit providers have varied approaches to payment restructures. Consumers must understand the financial consequences.

2. Consolidation of debt in the form of a single loan to pay up all other loans so that the consumer pays one installment as opposed to many other installments. There are other benefits to a consolidation loan in that the new monthly instalment would be, generally at a lowered interest rate compared to the accounts being consolidated; the credit profile would reflect a favourable payment history provided the required instalment is paid monthly and the chance to miss a payment is diminished as only one payment is due.

3. Sections 82 to 86 of the NCA divulges more on debt counselling as a means of relief for over-indebted consumers. Debt counselling is a court process facilitated by a debt counsellor who restructures the consumer’s debt by negotiating new payment agreements with the credit provider. This process attracts debt counselling fees and consumers cannot withdraw from the process until debts are settled.
It is important for consumers to note that they would require a monthly income to consider a consolidation of their debts or to apply for debt review.

4. Voluntary surrender of goods – Section 127 of the NCA is another option. Voluntary surrender of goods/assisted sales allow for cost effective and a less strenuous method of disposing of an asset and the liability attracted to that asset, whereas with repossession comes the added legal costs and the burden of a judgment. By acting promptly, you can avoid the route which may bring a lot of unnecessary stress and additional costs.

Consumers must consider their financial means and the implications of each of the above options.

Do not be left behind, evolve with the world and find new and effective ways to handle your finances. The Credit Ombud encourages consumers to communicate with their credit grantors if they foresee that they will be unable to satisfy their obligations. Having a tight budget means that you change old spending habits. Prioritize your debt and other financial responsibilities.

All hope isn’t lost, help is indeed available to those who seek it. We will assist consumers with member disputes for non-bank credit information and credit agreement disputes.
Should you wish to log a dispute, you may do so by calling us on 0861 662 837; sending a SMS to 44786 (free of charge); emailing us at This email address is being protected from spambots. You need JavaScript enabled to view it., or via our website complaint form which can be accessed at www.creditombud.org,za Our service is FREE.