Recommendations by the Debt Counselling Task Team

By natashabovill, 12 November, 2010

The National Credit Regulator (NCR) set up a Task Team in October 2009 to identify the blockages in the debt review process under the
National Credit Act and make recommendations to address the problems
identified after consulting all major stakeholders.

Based upon the NCR’s statistics and July 2010 Task Team Report, the current position in debt counselling is as follows:

1, 733 debt counsellors are registered with the NCR
184,000 consumers have applied for debt counselling since the implementation of
the NCA, with an average of 7,500 new applications being received per
month
Only about 10% of the new applications are being resolved through the courts
There has been a significant increase in the monthly payments by consumers
under debt counselling over the last six months, from R11,05 million in
June 2008 to R192 million for the month of June 2010
Default rates of around 48% are being reported by the large credit providers
with the balance of affected contracts performing at around 60% of
required contractually required performance
A very low number of applications are resolved consensually

The Task Team were chaired by Advocate Neville Melville and comprised of
Paul Slot, Johan de Ridder and Rob Easton-Berry. The team were assisted
by Marlene Heymans (NCR), Mareesa Kreuser (University of Pretoria Law
Clinic) and Sue Hatton (consultant to the banking industry). The Task
Team consulted with Gabriel Davel and Peter Setou, of the NCR, on an
ongoing basis. Over the course of the past six months, the Task Team has
had detailed engagements with a broad range of affected parties. This
includes discussions with payment agencies, debt counsellors, banks,
retailers, micro lenders, other credit providers, magistrates and a
range of industry specialists.

The Task Team concluded that the backlogs in the debt review process at present are being caused by a
complex set of factors related to:

Severe capacity constraints in the judicial system.
Process weaknesses;
Inadequate operational compliance by credit providers and debt counsellors as well as lack of co-operation between them;
Possible abuse of the process by consumers.

Flowing from the conclusions reached, the Task Team proposed:

That a National Debt Review Committee consisting of representation from
credit providers, debt counsellors and payment distribution agents be
established under an independent chairperson, with a mandate to develop,
implement and monitor working arrangements for the debt review process
on an ongoing basis, subject to the supervision of the NCR;
That codes of conduct for the three key stakeholders be developed and implemented as soon as possible;
That a set of enhanced debt review process guidelines addressing the process
breakdowns identified by the Task Team be adopted and implemented;
That a set of eligibility, affordability and reckless lending assessment
guidelines for debt counsellors be issued by the National Debt Review
Committee;
That a set of debt counsellor system standards and functional requirements be implemented under the auspices
of the proposed National Debt Review Committee;
That a set of general principles with which all debt re-arrangement rule sets
applied by debt counsellors must comply be established under the
auspices of the National Debt Review Committee;
That the Payments Association of South Africa and the relevant Payments Clearing
House be requested to remove the nominal monetary limit (R5000) on
non-authenticated and authenticated debit orders for Payment
Distribution Agents only, in order to improve the recovery rates on
debit order instructions for payment arrangements under the debt review
process;
That the National Debt Review Committee be required to formulate a set of debt restructuring rules that takes the
proposals of the Task Team into account and is broadly accepted by
credit providers.

To find out more about the Task Team’s and to view their full report, please visit the NCR’s website at http://www.ncr.org.za/DebtCounsellingTaskTeam.php

Source: Full Task Team Report by the Debt Counselling Task Team