It is not uncommon for the staff at SDC to receive a call where the consumer would ask “What is debt review?” In this article I will answer the question.
Debt review is a restructuring process for South African consumers that are experiencing some difficulty keeping up with their monthly debt repayments. The process was introduced by the National Credit Act of 2007 and is overseen by the National Credit Regulator (NCR).
An NCR registered debt counsellor will give you a structured repayment plan which will allow you to repay all your debt in an affordable way while giving you legal protection against credit providers.
Any natural person who has credit but can not afford the monthly payment on the due date, qualifies for a debt review assessment. The debt counsellor will have to find you over-indebted, which means that your reasonable living costs and minimum debt payments are more than your monthly income. People with no income, and business debt does not qualify for the process
Assessment: A registered debt counsellor (DC) looks at your payslips, bank statements, expenses, and credit agreements. After doing some initial calculations the DC will decide if you are over-indebted or not. If you are over-indebted the DC will give you the option to formally apply and then place you under debt review.
Proposal: The debt counsellor will drafts a new payment plan. It sets a single monthly amount and fair allocations to each creditor. The plan often stretches the repayment term and lowers instalments. Interest rates can drop through negotiation.
Protection period: Once you apply, credit providers must immediately stop further legal action for the next 60 business days.
Court or Tribunal order: When the proposal is accepted by your credit providers, the plan will go to a magistrates’ court or the National Consumer Tribunal to “seal the deal” and give a consent order. After approval, the new payment plan becomes binding on all parties.
Single payment: You will pay one amount each month to a Payment Distribution Agency. We use Hyphen PDA to make sure each creditor receives their payment as per the order.
Completion and clearance: When all short term debts in the plan are paid, the debt counsellor issues a clearance certificate. Credit bureaus receive it and remove the flag from your profile.
There are a few limitations, but they are there to help you become debt free. You cannot take on new credit while under debt review. Missing payments risks cancellation of the plan and renewed legal action. You must keep insurance on financed assets, like a car or homeowners insurance active. You also need to update the debt counsellor if your income or expenses change.
The fees are highly regulated by the National Credit Regulator. These include an application fee, a once-off restructuring fee, and a monthly after-care fee. A PDA fee also applies. The fees are already included in your monthly restructured payment plan to keep the review affordable. The fees vary and therefore your Debt Counsellor will discuss your specific restructuring fee with you when you decide to join us.
The duration depends on your debt level, income, and negotiated interest. Many plans run 36 to 60 months. Paying extra shortens the term. Pay on time each month to keep court protection and reach the finish line faster.
Payment arrangement on your own: You could call your creditors to discuss payment arrangements, but these arrangements are usually for a short term and costs you more because of compound interest. There is also no legal protection.
Consolidation loan: One loan can replace many debts. You will need a clear credit record and stable income. Interest may be high, and you might end up paying much more in the long run.
Sequestration: This is formal insolvency. It writes off a portion of debt but can lead to asset sales and strict limits. It suits extreme cases.
Do nothing: Arrears grow, credit providers take legal steps, and assets face repossession. This path is risky and costly.
These are the most common signs that you need assistance, but ultimately, when you start having trouble paying any account, give us a call.
Pick a DC that is registered with the National Credit Regulator. This is the most important step. If the DC doesn't have a valid NCRDC registration number, RUN!
The second step should be to read reviews about the company. Don't just believe any review you see; Hellopeter has many companies with fake reviews. Look at how many reviews a day the company receives, look at the time between reviews, do your homework. A company with 20 or more reviews a day are probably writing it themselves.
Lastly, get all fees, timelines, and duties in writing.
After you have settled all short-term debts and received a clearance certificate, the company will inform the credit bureaus who will then remove the “under review” flag from your profile.
We suggest that you work on building a cash buffer equal to one month of expenses. Use debit orders for fixed bills and track your weekly and monthly spending. And most importantly, only apply for new credit when you really need to and can afford it.
Debt review is definitely not a shortcut. It’s a lawful and structured path that will allow you to repay your debt in a much more affordable way while protecting you against credit providers and legal action. You will have one monthly instalment and a clear path to financial freedom. There will not be any new credit allowed for the duration of the process, but this trade-off will bring control, less stress and a realistic route back to financial health.