When should you resort to getting debt counselling?

[Dave A]

Also there is the new and improved in duplum rule. It says that a consumer's total debt (interest + charges) shall not exceed the outstanding principle debt at the date of default. If you consider the interest paid on a normal mortgage agreement, then the implications of this rule are simply huge. It is being contested in the Supreme Court of Appeal, however, if the appeal fails this is going to be a ruling of major significance in all of our lives. Should you go under debt review, you would qualify for this rule and it could cut your debt by more than half.

If I understand what you are suggesting here correctly (essentially, interest and charges may not exceed the capital over the term of the loan), there could be massive implications - particularly for long term loans such as bonds over property.

While this might seem to the benefit of the consumer, I see a massive danger here.

Banks are bound to change their product to cover the situation, which in turn could actually be harmful to the consumer in the long run. The period of the bond would bound to be reduced; perhaps it will be like car finance with a residual. The consumer will then be faced with refinancing at this point, with all the contingent costs that can go with that.

[AndyD]

The period of the bond would bound to be reduced; perhaps it will be like car finance with a residual.

The 20 year bond period in SA is already a short period by international standards. Many countries have a 25 year mortgage as the norm albeit sometimes with an endowment element wrapped up in them. I think it goes back to a time in this country when houses were cheap as chips but over the last 20 years the playing fields have leveled considerably, relative to income they're nowhere near as cheap as they used to be so I don't see shortening the bond period as an option.

[Dave A]

I'm certainly not suggesting people would be forced to pay off their bond quicker. I'm suggesting the work-around would likely take the form of forced refinancing.

[helpwithdebt]

Hi all
Debt counselling is sometimes not worth the effort.
Reason being that the National Credit Act allows for different credit agreements to be extended for certain periods in order to lower that payments.

Therefore there will always be a absolute minimum payment required for any consumer who wishes to apply for Debt review. If that minimum payment required is still less than what the client can afford the process will not help that client but rather put more strain on him/her than there already is.

Hope this helps.

[jinxster]

I would agree with helpwithdebt, just maybe a technicallity though, debt consolidation is maybe not worth the effort but counselling is hopefully to counsel the person / entity to be managing the debts of the future at a level they can manage to recover from past financial transgressions / mistakes.

Some places are worse off after consolidation because although there is a financial saving, the availbility to create debt has been increased and if it is used, you sit with a bigger problem later on.

As such a good debt counsellor would identify the possible problems and then give specialised advice.

Seems like "debt" has snowballed into such a vast category that everyones advice is correct for a specific situation, and this forum seems to have more financially responsible persons than not.

What I think does need addressing is who gets credit listed (Transuinon or Experian or there is another one). I see the people who get a salary each month without any business expenses get listed quite quickly, but those running their own business with a profit based income are listed very late and CCs and PTY LTD are listed even slower. I guess the creditors still believe a company will eventually pay anyway but an individual my not.

[Sarah-Jane]

From my reading of the NCA, a standard agreement in terms of which the purchase price for a business, is payable by way of two or more instalments and which makes provision for interest on the outstanding balance would require the Seller to register as a credit provider (if the outstanding debt is more than R500 000). It seems ridiculous for someone to have to register as a credit provider for just one agreement - or have I missed something?

[helpwithdebt]

Hi all

The Nca has crcked down on any "credit provider" with the National Credit Act.

What you say is true about the one agreement and the R500 000.

The Act states that you should be registered as a Credit provider if you have either an outstanding book value of R500 000 or more, or a total of more than 100 credit agreements to consumers.

Meaning that if you have one consumer who took a loan of R500 000 you must have a NCRCP number and if you have 100 credit agreements with consumers only lending 50c's each you must have a NCRCP number.

If you dont have the registration required by the Act those agreements of credit can be viewed by a court as a unlawful credit agreement.

Good luck

Stefan

[Dave A]

What I think does need addressing is who gets credit listed (Transuinon or Experian or there is another one). I see the people who get a salary each month without any business expenses get listed quite quickly, but those running their own business with a profit based income are listed very late and CCs and PTY LTD are listed even slower. I guess the creditors still believe a company will eventually pay anyway but an individual my not.

I think people are well aware that listing a business will probably reduce the prospects of them being paid at all. Typically a business is heavily reliant on credit facilities. Having these facilities reduced or removed could well be the fatal stroke.

[helpwithdebt]

My humble opinion is that the listings should be the same for all across the board(personal, trusts, cc's and Pty's) that is after all what the Credit act states. Doesn't happen in practice though. Remember that business entities have a lot more security to offer on default repayments because of the liability of the members and directors collectively and or separate. This means the credit provider can issue summons just about everywhere and on everyone to recover.

As for the listings and the reliability of credit by the business.
that default listing should be there to warn all other credit providers to be careful in lending!

hope it makes some sense, it has been a long day

Enjoy!

[jinxster]

Thats a very good description Dave, but if you ask me, it is a bit of false economy unless there is a good reason for the debt.

This is a very general reply, so obviously situation for situation it is different and it does not apply all the time.

I may think the company will recover and pay me eventually, but, sitting in a recruitment agency position. There are a lot of people registering who have been retrenched with immediate effect. In some cases it is a fallacy. In the past it was a facial tactic applicants use to make there reason for leaving understandable. In the last year, more and more of these stories are coming out and they are checking out.

This leads me to believe, that some people on the 1st of the month, dont actually know it is there last paycheck this month. How can one foresee that unless you had the companies books. It is unfair to knock them first and then the companies who in actual fact started the problem. From the company point of view, the good accountants would of advise, hey guys slow down on the expenses in light of debts, but a salaried person should have peace of mind over that. If they wanted that risk they would be working for themselves anyway.

So my take is, if it were possible, people should stand together so that we can spot the defaulters as quickly as possible. Indirecly, although the defaulter doesn't understand it at the time, in the long run they would be more helped.