Adv Randolph Samuel @ Lucid Living
There is an important misconception about debt counselling that I wish to dispel. That: being in debt review prevents a consumer from accessing further credit.
This misconception scares any would-be debt counselling applicant and I can understand why. It has been proven that credit can: on one extreme lift a person out of poverty and at the other end be a catalyst for wealth generation. The hopes and dreams of millions are inextricably linked to accessing credit. We have experienced its powerful effect, we own homes and cars, we have a better standard of living and we have entered the prized middle class – all as a result of access to credit.
Being excluded from the economically active is an unthinkable prospect. For the 8.59 million consumers that are potential debt counselling candidates, rather than be denied access to credit, it is more feasible to:
• live on hope that the situation will go away or correct itself;
• have their home and other assets repossessed; or
• be blacklisted on the credit bureaux.
Potential debt counselling candidates make up 47% of the 18.32 million credit-active consumers. Assume that half of these consumers enter debt counselling and as a consequence thereof, are prevented from accessing new credit – consider the impact that would have on our economy. It would cripple it! The economy would lose more than 4 million economic contributors. This scenario would be an unintended consequence of the NCA – who’s very objective is “to promote and advance the social and economic welfare of South Africans”.
Importantly, the NCA does not prevent a credit provider from entering into a new agreement with a consumer in debt counselling. Provided the creditor conducts a lawful affordability assessment and the applicant can afford the repayments on the facility, the credit provider can conclude the agreement. The credit agreement cannot be declared “reckless credit” because the consumer is precluded from bringing an application for reckless credit.
Furthermore credit providers are expressly allowed (under the NCA) to enter into particular credit agreements with consumers in debt counselling – a debt consolidation agreement falls into this category.
In our view it is not the intention of government or in the economy’s best interest to prevent people in debt counselling from access to credit. The impact of a contrary interpretation would destroy our economy and the efficacy of our financial market.
Debt counselling is a legal mechanism designed to protect consumers who are over-indebted, from losing their assets. If this mechanism is discouraged (by credit providers who have a vested interest) or unfairly disadvantages (because it prevents access to credit) the consumer it will fail and consumers will be the real losers. Debt counselling will not prevent you from access to credit – it will protect you and ensure that you remain economically active.