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Thread: Debt counsellors fleecing debtors

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    Silver Member Eugene's Avatar
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    Debt counsellors fleecing debtors

    The National Credit Regulator is throwing a lifeline to debtors after a flood of complaints highlight the exorbitant fees debt counsellors are charging over-indebted consumers to help them to climb out of the debt trap.

    Mpho Thekiso, the project manager of debt counselling at the credit regulator, which was established under the National Credit Act to regulate the credit industry, said her office received about 40 complaints a month about opportunistic debt counsellors.

    Effective since June 1, the Act makes provision for debt counsellors to assist debt-strapped consumers who cannot meet their monthly account repayments and who want to be declared over-indebted and restructure their debt.

    "When the debt counsellors are in the process of assisting them (the client), only then do they disclose their fees. Consumers are now wanting to discontinue the service of one debt counsellor and move to another debt counsellor and that's becoming a trend."

    Marius Jonker, a legal officer for the Association of Debt Collectors, said some debt counsellors were charging fees comparable to attorney's fees.

    "They just say I can charge what I want and they charge as much as attorneys do, plus a 12,5 percent collection commission," said Jonker.

    "Advice to consumers is to speak to your debt collector before going in for counselling because you are likely to get a better deal there.

    "The National Credit Regulator is aware of this and the Act will have to be amended," he said.

    http://www.iol.co.za/index.php?set_id=1&click_id=594&art_id=vn200711080 62457481C877646

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    Site Caretaker Dave A's Avatar
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    I've got a member of staff who went to a debt-counselor. His solution was to arrange for a consolidation of debt with Rudco. I suspect a hefty agency commission might have had something to do with it.

    She refused the deal because she heard some lurid story about Rudco not actually paying out and being in trouble with the National Credit Regulator (not from me, I promise). It was the last she heard from the debt-counselor. No bill arrived either - at least not so far...
    The trouble with opportunity is it normally comes dressed up as work.

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    Silver Member Vincent's Avatar
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    I was under the impression that debt counsellors were regulated as to how much they could charge, with the fees been as low as R25.00 per session. This was to stop everyone from becoming a counsellor and ripping people off even more.
    Vincent Marino
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    Debt counselors under the act should charge a R50 fee.
    If you evaluate what they are mandated to do this becomes ridiculous.
    On the first meeting they have to obtain a credit profile on the client from at least 3 credit agencies. This a a cost of R20 per report, if the debtor is married COP that would ad an additional R60 bucks.
    Now we are at R120 cost and the counselor has not even had a look at the debt.
    An income and expense analysis should be drafted and how long can that take? What can you charge per hour for your experience and know how?
    If discrepancies are picked up you must correspond with the institutions in writing, sometime again and again......where do you draw the line.
    I agree in the case Dave mentioned they should not have referred the lady to Rudco, that is a clear conflict of interest, but in the end debt councilors are consultants in business to make a profit.
    If they where appointed and paid by the state what quality of service could you expect

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by QUINN View Post
    If they where appointed and paid by the state what quality of service could you expect
    That is a very interesting thought.

    At the core of the problem, we've got folk who can't afford to pay their bills and need professional help. In the past this would be done by seeking an administration order and all the costs associated with that system.

    I suspect the theory was that the NCA system would somehow magically bring these costs down.

    Maybe. Maybe not. But it certainly seems to have churned up food for sharks.
    The trouble with opportunity is it normally comes dressed up as work.

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    Debt counsellor

    I agree with Quin,
    I am a licenced financial services provider (22 yrs), certified estate agent,
    e-filing tax practitioner and recently qualified debt counsellor ( due to inadvertently being called upon to assist an ill lady being taken-out by our body corporate i.e arrears levies - leading to a warrant of execution for the attachment of her flat!) - I didn't charge for the service however, I sourced a buyer for her flat and earned a mere 5% commission for the entire service which includes having to deal with all of her debts and arrears matters besides the requisite pschological support.
    The fees are prescribed in terms of the NCA - however, their is room for clarity..I don't enjoy the concept of minimal fees for massive effort and don't really believe that a reasonable living could be made. When one speaks of "sharks" - debt counsellors....the NCR actually believes that the "natural person" limitation of licencing in terms of the Act can be easily handled by employing a "team" of clerks under the debt councellor practice to take-up the admin load...I believe this is illusory....the intent of the Act is to have the licenced debt counsellor attending to each client and not "processing" them in a bureaucratic factory and thus they believe that the volumes processed should be sufficiently financially rewarding.....somethings not quite right here.....?
    And I've only just begun....what do I charge??The potential overheads, time and aggravation besides the holistic application of my various licences when applied to each individuals situation is worth what??

    I have saved thousands for clients by negotiation, does this not count?
    Identifying "reckless lending" already amounts to large sums and consequent relief...I note that attorneys are unhappy about the fees....yet what do they charge? One degree = ? Does this not relate to experience?
    Comments, welcome....

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by enyaw View Post
    ... and recently qualified debt counsellor
    There's a question waiting to be asked: What is involved with getting qualified as a debt counsellor?
    Quote Originally Posted by enyaw View Post
    ... besides the requisite pschological support.
    Definitely an aspect not to be underestimated - you are dealing with people. The prospects of a debt counsellor just extracting the information they need and getting on with the job is pretty remote. You are bound to get all the colour that goes with the territory. And that is time consuming.
    The trouble with opportunity is it normally comes dressed up as work.

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    Fairly simple Dave, check the website section 44 through to 46 then check the regulations Part C 10 -of the NCR, attend an approved course - I suggest You and Your Money.org - being partial to NGO's and the potentially altruistic nature rather than an organization working for profit and, they're less expensive - if you don't have a problem with the venue. At the moment it's a one week INTENSE course, mind-blowing having to absorb the NC Act and the regulations, a training manual, and hopefully have some background para-legal/accounting business then, write an exam and achieve no less than 80%. Having managed this, it is only the beginning, which is how I found your site.
    I have worked as an independant broker/agent in the Assurance industry for more than 20 years, have learnt a little in dealing with all manner of public - up to Ministerial level...so I believe I'm competent....
    Regards,
    Wayne

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    Dave A (29-Jul-08)

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    Fees

    The NCR advised that the current fees guidlines issued with consulatation with goverment(DTI) Industry, the fees would be evaulated January 2009, news are that the Negotiation Fees will increase by 13%, not sure if this has been approved though.

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    Debt counsellor fees under the spotlight

    It’s been a very complicated case. Back in March this year, the National Credit Regulator issued a compliance notice, stating that Durban debt counsellor Johan Walter van Zyl of J Walter Legal Forum & Associates had been “brought to book” for failing to comply with the conditions of his registration as a debt counsellor.

    At the time, the Regulator’s head of investigation and prosecutions, Advocate Jan Augustyn, said Van Zyl was defying the conditions of his registration by receiving payment from consumers who’d gone under debt review with him and paying the monies over to the creditors – that’s the banks, the retailers etc.

    MORE HERE http://blog.ecr.co.za/consumerwatch/?p=318

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