The Debt review process was established to give relief to over-indebted South African consumers. Being a new concept , there are still certain flaws to the system and the Debt Counselors and the National Credit Regulator are the first to agree with this observation. There are provisions of the National Credit Act that are unclear about how to exactly go about renegotiating the debts of an over-indebted consumers with their credit providers. The current global economic crisis further merits that the process be smoothened for the good of all stakeholders.
Close to about 150,000 indebted consumers have so far applied for debt review. It is also very fascinating to note that because of the National Credit Act, a new category of debtors have been exposed. Referred to as the Nina debtors, these are those who are over-indebted but have neither income nor assets.
The exact flaw in the process concerns how the Magistrate’s Courts are supposed to handle the approval of the debt re-payment plans submitted to them for approval. There have been no specific guidelines set. Another issue concerns over-indebted consumers with no current income. One angle the courts have tried to look at is ordering a stop on all repayments for six months. This however cannot be implemented because there is no provision in the National Credit they can refer to.
The dilemma on how to treat over-indebted consumers with no income has also hit debt counselors. They can’t offer the debt review if the consumer has no income, neither can they offer sequestration. The National Credit Act also does not have a provision on how to handle cases of retrenched, over-indebted consumers.
Aside from the procedural flaws that hamper the smooth implementation of the process, convincing the credit providers to approve the debt repayment scheme also becomes complicated when the court takes a long time to give its approval on the agreement.
When an indebted consumer has a lot of creditors, an approval of all debt repayments schemes has to be secured before actual payment starts. The debt review provides that the indebted consumer only makes a single monthly installment and his payment will be distributed amongst his creditors. The problem starts when creditors who have approved the consumer’s repayment scheme want the consumer to already start making their payments but there are still some creditors who have not approved their particular debt repayment schemes.
Debt counselors, credit providers as well as the National Credit Regulator are currently doing measures to correct the flaws to ensure its smooth implementation.