Best deals on Debt Review fees and monthly payments?

This article about Debt Counselling fees was posted on www.businesslive.co.za :
https://www.businesslive.co.za/bt/business-and-economy/2017-06-24-reckless-loan-relief-a-benefit-of-debt-reviewtext-it0-bd0-mode1-/
In our opinion, however, it requires some additional clarification.
As regards the Debt Counsellor’s Restructuring fee:
(a) The National Credit Regulator (NCR) Guideline is that the Restructuring fee equals the first month’s payment. This amount is CAPPED at R6 000 (i.e. even if the client’s monthly Debt Review payment is more than R6 000, the maximum Restructuring Fee paid to the Debt Counsellor shouldn’t exceed R6 000). If the client’s monthly Debt Review payment is less than R6 000, the Restructuring Fee should also equal this lower amount.
(b) The Debt Counsellor’s Restructuring Fee is NOT an additional payment that the client has to make to the Debt Counsellor. Once a client’s debts have been restructured to a monthly amount which they can afford, the client should only be required to pay that amount monthly. The Debt Counsellor’s Restructuring Fee AND the Legal Fees for the Debt Restructuring Court Application are distributed from those monthly payments.

This also relates to another practice of which we recently became aware. When we work with a client to assess the amount which they can afford to pay monthly towards their debt, part of our duty is to ensure that this amount is sufficient for “reasonable” proposals to be sent to creditors. “Reasonable” means that:
* Outstanding debts shouldn’t take unrealistically long to pay off ;
* Provision is made for appropriate interest, linked insurances and fees, where required ;
* Creditors are treated fairly and impartially (i.e. one is not preferred over others).
This means that there will be instances where the Debt Counsellor may advise the client that an initial assessment shows that the amount that they have available for debt repayment is insufficient, and their Budget therefore needs to be revised.

It’s come to light, however, that some Debt Counsellors will complete an application and sign up a client even if the amount available is NOT sufficient for reasonable proposals. The risk of this is that creditors could reject the Restructuring Proposals and consequently oppose the Debt Restructuring Court Application. This could result in the Magistrate who is hearing the Application refusing to grant it, and thus deciding to “reject the recommendation or application” [National Credit Act Section 87(1)(a)].
To try and avoid this rejection, some Debt Counsellors resort to unscrupulous tactics such as:
* Building an annual escalation (i.e. an increase in the client’s Debt Review payment amount) into the Proposals, sometimes without even telling the client or consulting them to verify that they will be able to afford such escalation. This means that, if the client doesn’t increase their payment amount after a year (e.g. because they weren’t aware that they were supposed to), they’re in breach of the agreements made with their creditors, and at risk of creditors proceeding with legal action or other means of collection. It also means that, although the Proposals may show that a client will be debt-free in a reasonable period, the reality is that it will take significantly longer.
* Getting back to the client AFTER they’ve made their first payment (i.e. the Debt Counsellor has received their Restructuring Fees), and advising them that either:
(a) They need to increase the amount that they’re paying to Debt Review, or
(b) The Debt Counsellor will need to remove certain accounts from Debt Review (i.e. the client still pays the same monthly amount, but it doesn’t provide for ALL of their debts, only those that the Debt Counsellor chooses to retain).

Our reason for saying that these tactics are unscrupulous is that we feel that they are not true to the aims of the National Credit Act which (as stated in Section 3(g)) are: “addressing and preventing over-indebtedness of consumers, and providing mechanisms for resolving over-indebtedness based on the principle of satisfaction by the consumer of all responsible financial obligations”. Rather than providing relief, the main aim of these tactics appears to be ensuring that the Debt Counsellor signs as many clients and earns as many Restructure fees as possible. Yes, all Debt Counsellors need to have a sustainable practice, but it should still be done by following the correct procedures.