WHAT IS THE NATIONAL CREDIT ACT?

Debt review is a formal legal process designed to help over-indebted consumers who are struggling to meet their monthly debt obligations. A debt counsellor will create a new, affordable monthly budget and payment plan, giving you a clear picture of your household spending versus your income, and a detailed plan on how to pay off your debt commitments.

The National Credit Act (NCA) 34 of 2005 was introduced by the South African government to better regulate the credit industry and protect consumers. The NCA provides for:

• Prohibition of unfair credit and credit marketing practices
• Promotion of responsible credit granting
• Prohibition of reckless lending
• Provision of debt review and rearrangement mechanisms for over-indebtedness
• Regulation of credit bureaus, credit providers, and debt counsellors

The NCA also established the following statutory bodies:

• The National Credit Regulator
• The National Consumer Tribunal

The National Credit Act replaces the Usury Act, the Exemption Notice, and the Credit Agreements Act.

It’s important to note that the household debt-to-income ratio in South Africa is among the highest in the world at approximately 72%. This means that, on average, 72% of the monthly take-home pay of South African households goes towards paying debt. Debt review, also known as debt counselling, was introduced in South Africa as a formal legal debt relief measure under the NCA to assist over-indebted consumers and identify cases of reckless lending to get them suspended.

Your Money Habits Improve

One of the most important benefits of debt review compared to other forms of debt relief, like debt consolidation, is the improvement in your money habits. Often, after consolidating debt, people find themselves back in debt because they haven’t established good money habits. Debt review, on the other hand, focuses on changing your behavior with money. You learn to pay cash for purchases and spend less, stopping the cycle of borrowing and focusing on debt elimination. Personal finances are 80% about behavior and 20% about knowledge.

Debt Review is Flexible

At Simunye Debt Advisory, we don’t hold back our clients. If you come into some money, like an inheritance, and want to pay off all your accounts and exit debt review, you can. We encourage our clients to pay extra when they can to come off debt review as quickly as possible and achieve their financial goals, like buying a dream house. We’ve helped many clients realize their dreams.

Benefits of Debt Review

• Your assets are protected while under debt review.
• Interest rates on your debt commitments are reduced.
• You pay one reduced, manageable monthly amount that covers all your accounts.
• There is no permanent record of having applied for debt review once the Debt Counsellor removes you from debt review.

Debt Review Process

1. A consumer approaches a Debt Counsellor and completes a Form 16 application for debt review.
2. The Debt Counsellor informs the credit bureaus and credit providers that you have applied for debt review using Form 17.1.
3. Credit providers furnish the Debt Counsellor with a certificate of balances of your debt commitments.
4. The Debt Counsellor completes a financial assessment of your situation using the certificate of balances.
5. If you are over-indebted, the Debt Counsellor informs credit providers by sending Form 17.2.
6. Within 30 days of your application, the Debt Counsellor submits a suitable repayment plan.
7. If accepted by credit providers, you will start paying according to the negotiated payment plan.
8. The Debt Counsellor will approach the courts to obtain a debt review court order, making the rearranged payment plan binding.
9. Once you have finished paying off your debt, the Debt Counsellor issues a Form 19 clearance certificate.

How Long Will Debt Review Last?

Most clients become debt-free within 3-5 years and receive a clearance certificate to exit debt review. The duration depends on factors like the amount of debt and how much you can afford to repay monthly. The more you pay towards your debt, the sooner you can exit debt review. Debt review is flexible, allowing additional payments to speed up the process. At Simunye Debt Advisory, we encourage our clients to aggressively pay off their debt to become debt-free quickly and start building wealth.

Do You Need Debt Review?

If you’re struggling to service your debt every month, it can be hard to know where to turn. We’re here to help you find the best solution. We’ll guide you through the entire debt review process and help you deal with your debts to become debt-free.