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FAQs

Frequently asked questions

The National Credit Regulator (NCR) was established as the regulator for the South African credit industry by the National Credit Act (34 of 2005) (NCA). It is tasked with consumer education, research, policy development, registration of industry participants, investigation of complaints and enforcement of the NCA.

The NCA requires the NCR to promote the development of an accessible credit market, particularly to address the needs of historically disadvantaged persons, low income persons, and remote, isolated or low density communities.

The NCR registers and ensures compliance to the NCA by the following industry participants: credit providers, credit bureaus, debt counsellors, alternative dispute resolution agents and payment distribution agents.

Debt Counselling (also known as debt review) is a debt relief measure provided for in the National Credit Act 34 (of 2005) and introduced in 2007, to assist over-indebted consumers struggling to pay their debts on a monthly basis.

In terms of section 86(6) a debt counsellor must conduct an assessment to determine level of over-indebtedness and how consumers can be assisted, an assessment of the consumers’ financial position is conducted by comparing the income of the consumer against the basic expenses and debt obligations of the consumer. Financial challenges arise when your expenses exceed your income, credit providers decline loan applications, you no longer have any funds on overdrafts and/or credit cards and when you cancel insurance premiums.

If the consumer is found to be over-indebted, negotiations with credit providers for reduced payments and the restructuring the debts will commence.

Lastly, the restructuring of debts must be confirmed by the Magistrate Court or the National Consumer Tribunal (NCT) through a court order or consent order.

The National Credit Regulator (NCR) was established as the regulator for the South African credit industry by the National Credit Act (34 of 2005) (NCA). It is tasked with consumer education, research, policy development, registration of industry participants, investigation of complaints and enforcement of the NCA.

The NCA requires the NCR to promote the development of an accessible credit market, particularly to address the needs of historically disadvantaged persons, low income persons, and remote, isolated or low density communities.

The NCR registers and ensures compliance to the NCA by the following industry participants: credit providers, credit bureaus, debt counsellors, alternative dispute resolution agents and payment distribution agents.

Debt Counselling (also known as debt review) is a debt relief measure provided for in the National Credit Act 34 (of 2005) and introduced in 2007, to assist over-indebted consumers struggling to pay their debts on a monthly basis.

In terms of section 86(6) a debt counsellor must conduct an assessment to determine level of over-indebtedness and how consumers can be assisted, an assessment of the consumers’ financial position is conducted by comparing the income of the consumer against the basic expenses and debt obligations of the consumer. Financial challenges arise when your expenses exceed your income, credit providers decline loan applications, you no longer have any funds on overdrafts and/or credit cards and when you cancel insurance premiums.

If the consumer is found to be over-indebted, negotiations with credit providers for reduced payments and the restructuring the debts will commence.

Lastly, the restructuring of debts must be confirmed by the Magistrate Court or the National Consumer Tribunal (NCT) through a court order or consent order.

You have probably realised by now that there is nothing more important than having a good credit score. Your credit score is the first thing that all lenders and creditors will look at before granting you any form of loan, whether you are looking at applying for a mortgage, personal loan, clothing shop account and even applying for a job. We as South African citizens should know the importance of having a healthy-looking credit score in order to maintain a normal lifestyle.

The sole purpose of your credit score is for creditors to see what level of risk you are before they lend you any kind of finance. The creditors will pull a credit check on you when you apply for any form of loan or finance. They will then decide if you are credit worthy or not. The better your score the better the chances will be of you obtaining the loan. A good credit score will also ensure that you get cheaper interest rates.

We have the following tips to improve your credit score:

A credit score reflects credit payment patterns over time, with more emphasis on recent information.

1 Pay your debt and accounts on time. Delinquent payments and collections can have a major negative impact on a credit score.

2 Keep balances low on credit cards and other “revolving credit.” High outstanding debt can affect a credit score.

3 Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix. It probably won’t improve your credit score.

4 Pay off debt rather than moving it around or consolidating your debt. Also, don’t close unused cards as a short-term strategy to improve your credit score.

 

Take These Steps to Improve Your Credit Score

Paying your bills on time is the most important contributor to a good credit score. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you should:

1 Minimize outstanding debt

2 Avoid overextending yourself

3 Refrain from applying for credit needlessly

4 Applications for credit show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. It may be to your advantage to use the credit you already have to prove your ongoing ability to manage credit responsibly.

It Takes Time to Improve Credit Scores

If you have negative information on your credit report, such as late payments, a public record item (e.g., bankruptcy) or too many inquiries, you may want to pay your bills and wait. Time is your ally in improving your credit scores. There is no quick fix for bad credit scores.

How Changes Affect Scores

One common question involves understanding how very specific actions will affect a credit score. For example, will closing two of your revolving accounts improve your credit score? While this question may appear to be easy to answer, there are many factors to consider.

1 Credit scores are based entirely on the information found on an individual’s credit report.

2 Any change to the credit report could affect the individual’s credit score.

3 Simply closing two accounts not only lowers the number of open revolving accounts (which generally will improve credit scores), but it also decreases the total amount of available credit. That results in a higher utilization rate, also called the balance-to-limit ratio (which generally lowers scores).

One change actually affects many items on the credit report.

It is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score. This is why the credit risk factors provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.

How Long Does It Take to Rebuild a Credit Score?

Actually, you don’t rebuild the credit score. You rebuild your credit history, which then is reflected by your credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change. Most negative changes in credit scores are due to the addition of a negative element to your credit report, such as your payment record. The following factors will continue to affect your credit scores until they reach a certain age.

1 Complaints lodged by Consumer – 6 Months

2 Debt applications – 1 Year.

3 Payment record – 5 Years

4 Legal enforcement by Credit Provider – 1 Year

5 Civil Court Judgements – 5 years

Once a consumer has applied for debt review, a flag is placed on the consumers’ credit record, advising all creditors that the consumer is under debt review and that no further credit be extended to the client whilst under debt review. All clients who comply with the debt review process and are consistent in payment will also enjoy the protection of the NCA against creditors, which will ensure that the clients’ assets remain safe and the client is protected against legal action. A new budget will allow a consumer to breath and know his/her monthly repayment obligations are covered.

Debt Consolidation is one single loan taken out to satisfy several other outstanding debts. The consumer is then supposedly left with one amount to repay. This practice may provide short term debt relief, but provides the consumer no protection under the NCA, and further, the consumer is still able to obtain additional credit, which could have detrimental effects in the future if he/she cannot afford to repay the instalment.

A Section 129 notification is an indication of pending legal action for recovery due to arrears of in excess of 20 business days.
The NCA allows a consumer to approach a debt counsellor within 10 days and to seek relief in terms of a debt review application. At this time the specific debt can be included in the debt review application and, in the case of assets (a car or a home) you will remain protected against legal action and remain the owner of the aforesaid.

All credit agreements must be included, except where a credit provider initiated legal action. Overdraft accounts are not reflecting on credit bureau and you need to disclose the information to benefit in including the debt for a reduced interest rate and repayment amount.

Where payments are made to service providers, we will include this in the monthly budget. If a consumer defaulted on a service account and interest in charges on the arrears, it might be included as incidental credit. Speak to your debt counsellor who has all the knowledge and types of accounts and financial obligations.

The determination of the length of time that a client will remain under debt review is based entirely on the amount of money that the client has available to service the debt. The more funds are available the sooner the debt will be settled and vice-versa.

Once all of the unsecured debt including your vehicle has been settled, you are able to exit debt review and repay your home loan. You will still be issued with a Clearance Certificate.

Debt Review and normal creditor payments (loan or consolidation loan) offers equivalent benefits if a consumer pays additional to the original agreement(s). If you have extra funds and pay additional to your Debt Review, the term will reduce and you will be debt free much sooner.

It is important to note that not all debt is repaid over the exact period. Once a credit agreement has been paid in full, the allocated amount will be distributed amongst the remainder of credit providers. We encourage consumers to pay additional where possible.

Debt Review is where all credit agreements (irrespective of the amount) are included in the application. The consumer maintains possession of all the assets and the single reduced debt repayment is confirmed by an order of the court. Interest rate concessions are offered and the term can be extended. Once all the debt has been repaid, the debt counsellor will issue a Clearance Certificate that will expunge all and any record of the consumer ever having been under debt review. Paying additional amounts will result in huge savings as the term of debt review will reduce.

An Administration Order is granted for maximum debt less than R50 000.00. An administrator oversees the repayment of only unsecured debt and once the debt is paid in full, a rehabilitation order needs to be obtained to expunge the administration order. There is no sale of assets involved as assets (home loan or vehicle asset finance) are not included. Consumers also don’t have the benefit of reduced interest rates on their debt included in the Administration Order.

With Sequestration all your assets are sold to pay off the debt and traditionally you are left with no money in your pocket. A consumer cannot apply for credit once sequestrated and the record could reflect up to ten (10) years on credit bureaus, or until rehabilitation order is granted.

At the onset of your debt review application and at your request, your debt counsellor will do a reckless credit investigation on all debt that seems to have been granted recklessly. Your debt counsellor will then deal with these matters as per the legislation as set out in the National Credit Act, which could result in an extension in repayment or reduction or complete write off of that specific debt.

In order for your debt counsellor to submit a repayment proposal to your credit providers, you need to have a regular income. If you are currently unemployed, we will not be able to assist and we recommend you engage directly with your credit providers on any payment relief (it might be that your Credit Life Insurance cover you for a specified in certain circumstance, for e.g. retrenchment etc.).

If you are married in community of property or by traditional law, it will be a joint application. Where you and your partner are married out of community of property and share in debt, both of you can apply for debt counselling.

The biggest challenge is where are payments are stopped. Non-payment will allow a credit provider to terminate the debt review process and in worst case, initiate legal action. A consumer can only benefit from interest rate concessions and a reduced repayment plan whilst full payment is effected monthly.

The National Credit Regulator (NCR) prescribes a fee and a consumer has the benefit of not having to pay this upfront. The following fees apply, but are included in you Debt Review repayment:

  • Once-off Application Fee and Administrative Fee
  • Once-off Debt Restructuring fee for your debt counsellor
  • Once-off Reckless Credit investigation fee (only when necessary)
  • Once-off Legal fee for an attorney to obtain a court order for the new debt repayment plan
  • Monthly Payment Distribution Agency (PDA) fee and Debt Counsellor Aftercare fee to manage the monthly repayment

Our fee structure is transparent and any fees that can be levied are reflecting on the Form 16.

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