Debt counselling gone horribly wrong

[Dave A]

I have been following a story about debt counselling gone wrong for quite awhile now. It has been truly frustrating.

I haven't posted anything on The Forum SA so far because every time my sense of justice is inflamed to breaking point, it seemed the problem had been resolved. However, it just keeps coming back – getting worse and worse every time.

Ordinarily I wouldn't name names, but this has gone on for so long and is such a disgrace that I believe the delinquents deserve to be named.

It is quite a long tale of woe, so I will break it down into episodes that I will post over the next few of days. This should be quite a ride!

The story starts in 2009. Mrs X's husband has been struggling to find work for over six months now, and she realises that financially they are in over the head. Mrs X is making decent money, but it isn't enough to get by with the existing financial commitments without a second salary from her husband.

So quite sensibly, and in accordance with the National Credit Act, she contacts a debt counsellor to go under debt review.

In November 2009 she contacted ***** of *****, placing her financial future in his hands.

All seemed to be well. Various notices floated back and forth and in December 2009 she started paying the debt counsellor the agreed amount for distribution to the various creditors. Of course the debt counsellor gets paid first, so the creditors only started receiving money in March 2010 by the looks of things. But everything seemed to be sorted.

That is, until a call from Standard Bank in November 2010. Suddenly it became clear that all was not going to plan. But that's a story for the next episode.

[Blurock]

Scary if it takes 3 months for the first payment to reach creditors. More interest and penalties. By that time you are well up to your nose in the brown stuff!

[Citizen X]

When I was in the retail industry, HR always maintained that the only way you will reduce shrinkage is to hire honest people, they added...but how do you know who is a honest person. An adage from that time holds true, " a new broom sweeps clean." This is certainly not the first horror story I've heard about debt counsellors. I don't want to disparage an entire industry but it seems there are many rogue elements in the debt counselling industry. They know that you vulnerable and scared when you come to see them!!

[thinusmj]

Debt Counselling Fee Structure

[Blurock]

Debt councillors are regulated by the National Credit Regulator. For Debt counselling related complaints send a mail to dccomplaints@ncr.org.za

For bank related complaints, contact the banking ombudsman.

[Dave A]

The current flurry of emails flying back and forth has yielded this gem from Mrs X's husband:

---

I read an article in IOL news regarding an Attorney that new has to repay all his clients, because he did not follow NCA rules, regulations or guidelines.

Insert from a portion of said article:

"Judge Natvarial Ranchod also ordered Bornman to refund all past and current consumers’ debt counselling fees where he had failed to submit repayment proposals to credit providers or refer matters to the tribunal or a magistrate’s court within 60 days of the consumers applying for debt counselling.

Ranchod ordered the National Credit Regulator (NCR) to appoint an investigator to decide on the fees to which Bornman was entitled for the services he has rendered.

Zweli Zakwe, acting manager for investigations and enforcements at the NCR, says Bornman will have to surrender to the NCR his clients’ files so that they can be assigned to another debt counsellor.

The High Court case stems from an investigation in August 2009 by the NCR following 19 complaints about Bornman. Some of the consumers who complained to the regulator were being harassed by credit providers and, in some cases, had lost their assets even though they were undergoing debt counselling with Bornman.

The NCT heard the NCR’s case against Bornman in October 2010. It found in favour of the regulator and ordered that Bornman be deregistered on the basis of repeated contraventions of the NCA. Bornman appealed against the ruling, but the High Court last week dismissed his appeal with costs.

During its investigation, the NCR found that Bornman contravened the NCA and the conditions of his registration in that he:

* Deducted commission to which he was not entitled.
* Was paid after-care fees for services he did not provide. (After-care fees are a percentage of the monthly instalment paid in terms of a debt repayment plan.)
* Failed to follow the debt review process prescribed in the NCA.
* Neglected to assess his clients’ level of indebtedness properly.
* Failed to issue repayment proposals to his clients’ creditors.
* Failed to submit repayment proposals or recommendations to the relevant magistrate’s courts "

[meldasilva]

When I was in the retail industry, HR always maintained that the only way you will reduce shrinkage is to hire honest people, they added...but how do you know who is a honest person. An adage from that time holds true, " a new broom sweeps clean." This is certainly not the first horror story I've heard about debt counsellors. I don't want to disparage an entire industry but it seems there are many rogue elements in the debt counselling industry. They know that you vulnerable and scared when you come to see them!!

This is true that there are rogue elements and this is why you should seek out debt counsellors who belong to the Debt Counselling Association (DCASA). They are bound to a code of conduct and if tehy do not deliver you can go to the association for help.

[thinusmj]

How does the Debt Counselling process work?

[Dave A]

Thinus, thank you for the link to the rates debt counsellors should be charging. Just for the record, it seems the debt counsellor managed to pocket the first R10 000 for his efforts as debt counsellor! Some of this money probably should have gone towards legal expenses, but here comes the first twist in this tale.

The call from Standard Bank Asset Finance in November 2010 was to inform Mrs X that her debt administration arrangement had been terminated. She was told that she must settle the outstanding balance owed (or perhaps that might have been the arrears owed) or the car would be repossessed.

Mrs X immediately contacted the debt counsellor, who assured her that the arrangement had to be reviewed annually and he would attend to the renewal and deal with Standard Bank. In December 2010 the debt counsellor forwarded an e-mail to Mrs X from Standard Bank which was quite brutal. Standard Bank held that Mrs X had entered into debt counselling on 26 November 2009. Accordingly they should have received a payment by the end of February or early March 2010 and the account was formally terminated on 29 March 2010 due to non-payment.

In hindsight, it emerged that the payment made on 7th March 2010 to the debt counsellor was only disbursed to creditors in June 2010. If this disbursement had been paid out timeously, it seems much angst could have been avoided - or at least Standard Bank would have had one less excuse to duck out of the debt rearrangement process.

Mrs X appealed to Standard Bank asking for some latitude and could they please stick to the debt rearrangement agreement. Quite generously, Standard Bank agreed to hold off on action if Mrs X could present proof that the debt arrangement had been made an order of court.

What good news!
Or so we thought.

Mrs X approached the debt counsellor and asked for a copy of the order of court – you know, the one you are supposed to get as part of the debt rearrangement process. There was a deafening silence.

Sick and tired of all this nonsense, I called the debt counsellor in January 2011 to find out what was going on. Where was the court order?

The debt counsellor's reply was "Do you know what the backlog is like in the courts? It takes forever to get an order of court on these things!"

So I asked if he could at least send a copy of the application. No, he had not even made an application for a court order.

My parting shot to the debt counsellor was "You cannot claim a backlog at the courts as a defence if you have not even made an application! You are responsible for this mess, and I expect you to fix it".

Just for the record, Mrs X is adamant that the debt counsellor had told her part of the initial fee was to cover the costs of getting a court order. She had paid for a court order and it seems the debt counsellor pocketed the money instead.

Probably a good place to end this episode. I regret there is much more to follow.

[Citizen X]

There is a backlog in the courts but not any backlog to him taking his fee, that priority is in the front of his queue!