In breach of credit agreements

Debt Center

Welcome to another journal from registered debt counsellor Annienne Nel, who has more than 11 years’ experience in the Debt Review industry and who will now share with our readers some facts about the debt review process and other occurring matters.

I DEDICATE THIS ARTICLE TO ALL THE CONSUMERS AFFECTED BY THE COVID-19 LOCKDOWN AND RESTRICTIONS.

In Breach of credit

Default of accounts

The times remain uncertain for millions of consumers with no idea when the current lockdown will be over. They are dealing with household expenses, creditors demanding payments and landlords insisting on their outstanding rent from business owners.

In our previous article we shared more about the payment breaks ending for many consumers at the end of July. Not being able to afford the contractual credit agreements became a reality for many consumers. The creditors are not assisting consumers with extended payment breaks, leaving millions over-indebted.

Consumers are finding themselves in arrears of various credit agreements causing panic and fear. Some have smaller income brackets now because of wage reductions. These are all the results of the Covid-19 Lockdown.

In this blog journal, we want to focus on what the clients of banks and creditors should know and what to do when they are in breach of their agreements before legal actions starts.

How creditors take legal action against consumers:

One can’t ignore the creditors’ legal right to enforce the terms and conditions of the contractual agreements that were entered into.

You are in breach of your credit agreement when:

  1. Paying short every month.
  2. Paying later than the agreed deadline
  3. Skipping payments on a regular basis.
  4. Skipping payments on new arrangements
  5. Disregarding the credit agreement and ending up defaulting on the monthly payments, interest, service fees and insurance fees.

The creditor then has the right to issue you with a Sections 129 notifying you to contact a registered debt counsellor or make arrangements with them directly. This document could be served to you via registered mail or served on you by a sheriff.

Actions of the collections department:

 When the consumer is found to be in default of a credit agreement, the creditor will refer that account to their collections department. This is where your problems really start and it can interfere with your ability to be productive at work or relax when at home. There are dedicated call centre agents at the collections department who will call you on a daily basis. They won’t stop until they can get in touch with you to conclude payment arrangements, which they will accept until the account is brought up to date.

When consumers default on payments:

Many consumers presume that it will be okay if they pay a lesser amount or whatever they can afford on their accounts in arrears. This is where the problem lies. It is not okay, and the account remains in default and will result in the creditor proceeding with legal action.

Let us look at how the creditors assess the consumer’s payment behaviour:

  1. The promised date of payment of the consumer will be captured in the system by the call centre agent who assisted in the arrangement.
  2. They monitor monthly if the consumer will default on the payments.

When the consumer defaults on the payment arrangement due to not being able to afford it, the collection company will refer the matter back to the creditor telling them that the consumer had failed to pay. At this point the collection will be handed over to an attorney to start the legal process AND TO REFER THE MATTER TO COURT for collection by means of default judgment.

Creditors list consumers in default with the credit bureaux:

The creditors are required by the National Credit Act to list consumers who are in default of their payments at the registered credit bureaux. These negative listings will prevent the consumer from getting further credit and it could end in failure when going through the rental process to lease a property.

What is “reckless lending” and how does it affect you?

We have found in many cases that consumers received loans they could not afford in the first place. That is why you need to work with an experienced debt counsellor who understands the concept of reckless lending. Taking a reckless lending matter to court leads into a full investigation in the consumer’s circumstances, showing how the creditor granted the loan agreement recklessly. See our previous article on this topic https://www.debtcenter.co.za/8-ways-how-reckless-lending-can-affect-you/

When your vehicle is in arrears, what can you expect the creditor to do?

The creditor will refer the account to their collections department. A vehicle is an unsecured asset and in the credit agreement it is the listed surety.

When you default on this credit agreement, this is what you can expect to happen:

  1. The account is referred to the collections department.
  2. A collections agent representing the bank will contact you to bring the arrears up to date.
  3. Failure to bring the vehicle arrears up to date will result in collection.
  4. The account will be referred to a collections agent who works in the field.
  5. The collection agent will contact you to visit you at home or at work.
  6. The agent will enforce the bank’s rights to have you surrender the vehicle.
  7. Once you surrender the vehicle, the agent will give you 20 days to bring the arrears amount up to date.

By the time you voluntarily surrender the vehicle to the agent after being put under so much pressure, it is too late to ask a debt counsellor to help you.

Vehicle insurance:

Do not believe that you can drive a vehicle that is financed without vehicle insurance. The creditor has the right to enforce their insurance on you and collect the premiums with your payments. If this fails, they can terminate the agreement and proceed with collection of the asset on the grounds that the vehicle is not insured and the consumer therefore remains in breach of the agreement.

What you should do when the vehicle is in arrears:

Contact us at Debt Centre before you sign any documents and surrender the vehicle to the agent. You have rights and you can allow us to assist you to enforce your rights.

Home loans

When your home loan is in arrears, the bank will follow the same processes as with the vehicle, but with a difference. The bank has no legal right to just come and take your home like with a car when in breach of the said agreement. The bank has to issue a summons by the High Court.

If you are in arrears with your home loan, contact us at Debt Centre to advise and help you rescue the asset from repossession.

Use this link: https://www.debtcenter.co.za/contact-us/

Applying for debt review with the promise of lower interest rates:

Consumers are often misled by false advertising and marketing. It is important to note that the interest rate on credit agreement cannot just be reduced by a party who presumes that the creditors will accept this. There is a process in place and various factors are taken into account when terms are negotiated with the accounts listed in debt review..

Business owners with personal debt:

Many business owners are finding themselves in a difficult financial position and cannot honour their personal credit agreements. Personal accounts and those of a Sole Proprietor may qualify and may be submitted into debt review.

Debt of a business:

When you have a registered business, a Close Corporation or a Private Company, the debt of the business cannot be submitted for debt review. The reason for this is that the company is a Juristic Entity and it’s not in the personal name of the debtor. The business directors are legally sureties for the debt and therefore that debt cannot be allowed into debt review.

Warning:

WHEN YOU ARE PROMISED BY ANY DEBT COUNSELLOR THAT ALL YOUR BUSINESS DEBTS CAN BE INCLUDED INTO DEBT REVIEW, IT IS BEST YOU KNOW THE FACTS BEFOREHAND. THIS CAN JEOPARDISE YOUR DEBT REVIEW APPLICATION, CAUSE TERMINATIONS AND LEAD TO LEGAL ACTION. THE BEST ADVICE WOULD BE TO CONTACT THE CREDITORS AND MAKE PAYMENT-EXTENSION ARRANGEMENTS DIRECTLY.

Debt mediation and what you should know:

There are fewer consumer applications that qualify to be entered into a debt mediation repayment plan. We invite you to read more about this subject in one of our previous journals to learn how to qualify. Click on the link:

https://www.debtcenter.co.za/mediate-debt-outside-debt-review/

Consumers’ rights while in debt review

There is a grave misunderstanding regarding the concept of debt review in general, because of fraudulent service providers misleading the uninformed consumer.

The National Credit Regulator protects the consumer’s rights and monitors all the debt counsellors’ cases. Those who are reported or found to operate outside the regulated laws, are prosecuted in a National Consumer Tribunal if they are in breach of their CODE OF CONDUCT.

The Role of the NATIONAL CREDIT REGULATOR (NCR) and the REGISTERED DEBT COUNSELLOR:

The NCR is a body of authority appointed by South African government and responsible for the regulation of the country’s credit industry. It is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints and enforcing the rules and laws of the National Credit Act as set out in the Constitution.

There is a Debt Help System (DHS) where consumers who apply for debt review are listed and recorded, and their status is updated during the processes. When a consumer’s debts are fully paid up, he or she can apply for a Debt Review Exit process whereby the consumer will then be removed from the registrar.

A non-registered person cannot access the DHS system and remove the consumer from debt review. Only a registered debt counsellor can perform that duty.

How to check for a registered debt counsellor:

When applying for debt review, it is the consumer’s responsibility to ensure that the debt counsellor whom he or she would like to consult is registered with the NCR. Consumers can visit the NCR registrar to do a thorough check on their debt counsellor at https://www.ncr.org.za/register_of_registrants/index.html

What are the functions and duties of the debt counsellor?

 The debt counsellor has an obligation to assist consumers who are struggling to pay their debts on contractual agreements. When a consumer is retrenched or loses their employment, the debt counsellor can motivate current circumstances with the creditors to assist the consumer, especially now during the pandemic with its enforced lockdown and restrictions on several levels.

Nowhere in the National Credit Act does it state that the consumer can apply for debt review and pay what he or she can afford. This is where so many clients are misled in believing they have the right to dictate to the debt counsellor what they can afford to pay. If that was so easy, then they would not have creditors apposing applications in court and consumers placed under so much pressure to pay more than what they agreed to.

A good reputable debt counsellor will not mislead the consumer. We have the latest technology to ensure that our clients receive the correct outcome time and time again. We restructure payments to what is more affordable and yet reasonable for all parties.

Here is an in-depth look into the client’s financial situation at the time of applying for debt review:

  1. Applicant found already in arrears with credit status.
  2. The income is affected due to COVID-19.
  3. Salary deductions to be calculated.
  4. Household expenses determined.
  5. The debt exposure to be restructured to a more affordable payment plan.
  6. The creditors get issued with a notice that the consumer has applied for debt review.
  7. The assessment is finalised once the Certificate of Balances is received from the creditors.
  8. Reckless lending is investigated.
  9. The consumer is found over-indebted or the application is rejected where the consumer is not found over-indebted.
  10. Processing of the new restructured payment plan.
  11. The matter is referred to court.
  12. The court process can be a quick grant of the order or a lengthy process.
  13. Creditors may not terminate the service, seize the asset or proceed legally against a consumer when the matter is before the court.

Creditors have the rights to appose the applications before the court:

When the debt review process is referred to the court, the creditors have the right to oppose the applications. Some applications could take longer to be approved due to the following reasons:

  1. The debt issues could not be resolved in a reasonable time.
  2. The debt counsellor could not accept the creditor’s counter-proposal due to the consumer’s affordability limits.
  3. Accounts were terminated.
  4. The creditor did not agree with the interest rate and removed the service fees from the proposal.
  5. The consumer could sell moveable assets to settle some of the debt.
  6. The consumer did not declare a secondary income on his or her application
  7. The parties are married out of community of property and the spouse is not contributing towards the household expenses, which means the applicant can pay more on the overall restructuring proposal.
  8. Home loan or any other credit agreement was excluded from the application.

DEBT REVIEW IN SHORT:

It is a legal process where consumers benefit 100% under the applied laws of the National Credit Act. The consumer has the right to apply for debt review, whereas the creditors have the right to decline or counter a proposal. It remains the duty of the registered debt counsellor to restructure the payments and negotiate successfully with all the creditors on behalf of the consumer. And when all of this fails, the matters will be presented in court.

That is why we at Debt Centre work with one of the very best Debt Review Attorneys and specialist in the field, Liddle and Associates. They are a firm with a history of precedent cases that challenged the law on how debt review was interpreted by the National Credit Act, and the way it should be applied in court.

Since 2007 the NCR has been improved with a more streamlined process to benefit the acceptance rates of proposals and the matters granted in court to obtain debt review consent orders.

Debt Review exit / removal / withdrawal process:

This is where so many consumers have been scammed by companies promising the services of a registered debt counsellor to remove consumers from debt review, while they have no access to the NCR system or to the registered Credit Bureaux listings in South Africa.

We recommend that our readers check our journal about How to EXIT debt review for all the necessary information on the subject:

https://www.debtcenter.co.za/debt-review-exit-the-new-buzz-where-thousands-of-consumers-are-scammed/

Why DEBT CENTRE is the right choicewww.debtcenter.co.za

We are a dedicated professional team of registered debt counsellors with a good reputation and standing with the NCR. We keep ourselves up to date with our case monitoring and are in compliance in the way we deal with all our debt review applications.

We do not make unrealistic promises to our clients during the debt assessment of their finances, and we ensure that our clients can afford reasonable household expenses with a newly restructured ONE monthly INSTALMENT.

On our website we have a Financial calculator application exercise that will assist you with an easy budget outcome so you can understand your current status:

Click on: https://www.debtcenter.co.za/financial-debt-calculator/

We treat all our debt applications on the basis of individual circumstances where no employee’s situation is the same as another.

Once the consumer is in the debt review programme, a legal notice will show on the consumer’s credit profile at the credit bureaux. This will indicate to all creditors that the consumer applied for and is registered under debt review. This means they are over-indebted and are thus protected by the laws of the NCR.

For all your debt enquiries please do not hesitate to WhatsApp us on our available consumer lines on 083 459 3056 or 068 279 5951, and connect with one of our dedicated registered debt counsellors for immediate assistance.

IN CONCLUSION:

This article has one goal in mind and that is to ensure consumers receive the correct information to make the best choices to prevent legal action when they are defaulting on their credit agreements. Having an experienced Debt Counsellor on your side when you can’t pay your debts is a good thing. It will prevent the creditors from pursuing legal action against you. Whether you are a pensioner, the recipient of a disability or government social grant, child maintenance, an employee at a government institution, a private sector employee or a business owner – the desperate need for help is cutting deep in our communities.

Message from the author, Annienne Nel:

My thoughts are with everyone in these difficult times and I pray that every household will have food on the table. I know the challenges at work and the uncertainty you are facing, can’t be easy to endure. May you find the calm and peace to accept what you can’t change and have a company you can contact to help you with your debt. May God bless you and your loved ones!