As Registered Debt Counsellors, we’re probably biased, but we genuinely believe that Debt Review is usually the best mechanism available for resolving over-indebtedness. Before the National Credit Act was passed (in 2007), the only options for consumers who needed relief from their debt burden were Sequestration (also known as Bankruptcy) – which has serious long-term consequences – or Administration. Here are five reasons that we feel that Debt Review is a significant improvement on Administration :

1. Debt Review doesn’t just aim to make a consumer’s debt repayments more affordable (although that IS a major focus) ; It also aims to assist the client to become completely debt-free. Debt Counsellors can generally re-negotiate interest rates and get them significantly reduced. Because Administration and other debt resolution mechanisms can’t do this, clients who are paying lower instalments could end up with ever-increasing balances, and never actually pay the debt off. Also, once a client’s debts have been settled via Debt Review, the Debt Counsellor will issue a Clearance Certificate and update the Credit Bureaus accordingly  ;
2. Debt Counselling fees (as regulated by the National Credit Regulator) are lower than the fees which Administrator are allowed to charge. Both are a percentage of the client’s payments but, whereas Administrators can charge 12,5%, a Debt Counsellor’s fee is only 5% ;
3. Administration can only deal with debts up to a maximum value of R75 000, whereas Debt Review has no upper limit, and can restructure (and protect from legal action including repossession) Home Loans, Vehicle loans, large Personal Loans and Credit Card debts, etc. ;
4. Administrators are only obligated to make payments to creditors every three months, whereas Debt Review distributes payments every month. This results in less interest accruing between payments, thereby reducing the outstanding balance more quickly ;
5. Debt Counsellors are monitored and regulated by the National Credit Regulator, while there is no monitoring body for Administrators. There is therefore the danger of less accountability, and greater difficulty in resolving problems and complaints for clients under Administration ;
6. A good Debt Counsellor will also investigate other factors (such as Reckless Lending and Prescribed Debt), which could result in clients not being liable for certain debts.

We strongly believe that our National Credit Act has placed South Africa at the forefront of consumer credit protection world-wide. Even first-world countries (such as the U.K.) are only now waking up to the need for this type of legislation (to govern maximum interest rates, provide options for over-indebted consumers, etc.), whereas South Africa passed this Act eight years ago.