Debtfree Issue 202302 DebtBusters Special Edition

SPECIAL
EDITION
DEBT REVIEW
AND YOUR
CREDIT SCORE
Issue 02 of 2023

EXCELLENCE IS DOING
ORDINARY THINGS
EXTRAORDINARILY
WELL
– John W. Gardner

WHAT MAKES US
EXCELLENT?
/ Unimpaired and automated PDA systems
/ Integration with top-ranked Debt Counsellor systems
/ Best customer support in the country – queries are resolved within 24 hours
/ Strong compliance and best-industry-practice implementation is at our centre
Call Saishen Krishnan
Head of Hyphen PDA | 071 884 7300
Or call our friendly support centre on 011 303 0060 - Option 2
or visit our website www.hyphenpda.co.za

FROM THE EDITOR
Tracking progress and keeping score is a very
human characteristic. We do it all day long. We
track our steps, our heart rates and our bank
balance. Even our favourite sporting events have
scoring.
Some people can even watch fancy electric cars drive round and
round and keep track of who is in the lead, and over the entire
season who the winner will be.
Of course, a positive (or increasing) score makes us happy (in
most sports the one with the most points wins), a lower score
not so much.
This month, we delve into credit scores. This little set of numbers
can drastically impact your ability to access credit at a good rate,
and we discuss how entering debt review impacts on that score.
It is both simple and complex, so check out the article if this is
something that you worry about.
We also look at recent NCT rulings about debt review and how
consumers must come to the party, and work along with the
process or they will make it impossible to succeed in debt review.

Part of working with the process involves the legal side of debt
review. It can be a little challenging for some people, and by
making mistakes when it comes to a Confirmatory Affidavit you
could make or break your debt review.
We mention top tips for getting this done in record time, with no
hiccups. Here is a quick tip: don’t use regular mail via the post
office to send it back to your Debt Counsellor, if you want the
papers to reach them before your debt review is actually over (even
with governments’ most recent R2.5 Billion bailout).
Paying off your debt is really one of the ways you can reset your life
and finally move towards success. Instead of owing people your
time and money, you can use that time and energy to increase
your own points on the board.
If you are in debt review, then you don’t want to see big numbers
when you look at your balances. This is one time in your life
where you want to see smaller numbers. So, stick to your monthly
budget, keep paying each month, track of your progress and pretty
soon you could win by getting those balances down to zero and
finally becoming debt free.

FROM THE
DESK
RESEARCH SHOWS
DEBT COUNSELLING
DELIVERS CREDIT-
SCORE BENEFITS
Evidence busts the myth
that debt counselling has
long-term negative impact
on credit scores.
Over-indebted consumers who
successfully complete debt
counselling have, on average,
significantly higher credit scores
than those who consider it but do
not proceed.

This was the finding of a DebtBusters’ analysis of consumers who
applied for debt counselling over the past five years.
Benay Sager, head of DebtBusters, South Africa’s largest and leading
debt management company, says the primary driver of a high credit
score is the ability and willingness to pay back what is owed. This is
true irrespective of whether the person is in debt counselling or not.
“If you pay back your debt, your credit score will not be negatively
affected over the long term. Debt counselling provides an effective
means to pay back what you’ve borrowed in a structured and
affordable way.”
The data shows the impact on the credit score of over-indebted
consumers who applied for debt counselling at DebtBusters. These
consumers who stuck to the restructured payment programme on
average completed their debt counselling journey in under five years.
A consumer’s credit score will drop during the first few months of
the debt counselling journey. In fact, for many consumers, the credit
score is already in decline when they apply for debt counselling as
they struggle to make ends meet.
Sager explains the initial decline is to be expected as credit providers
receive limited amount of debt repayments during this initial period as
per wider industry agreements. He also mentions that credit providers
know they will not receive payments in the first few months, and this
is built into the overall programme.

FROM THE DEBT BUSTERS DESK
Once negotiations with credit providers are finalised, and the
consumer continues to pay the new restructured and more affordable
repayments, a steady increase in their credit score can be seen.
By month 12 of the debt counselling journey, the consumer’s
credit score is on par with what it was when they applied for debt
counselling. The increase gets even higher post clearance (i.e., when
debt counselling is completed) - in fact on average consumers who
complete debt counselling have an average credit score that is 112
points higher than their starting point.
“The data is unequivocal. It busts the myth that debt counselling
negatively affects your credit score over the long term. Over-indebted
consumers who enquire about, sign up and successfully complete
debt counselling will not only have lower monthly debt repayments
by having their debt restructured, but will emerge with significantly
higher credit scores than their over-indebted peers who should have
signed up but did not,” says Sager.
He says your credit score is important because these three digits
are what everyone from banks to landlords use to determine how
financially dependable you are. For the financial industry, the credit
score is just as important as an ID number, except credit scores can
go up or down.
A long-term goal of debt counselling is to help consumers improve
their credit standing. “We see that on average, clients that have
‘graduated’ from debt counselling, manage to secure vehicle finance
within two months and secure a new home loan within five months

after completing debt counselling. This shows that for dedicated
consumers, debt counselling can help turn around their long-term
financial standing.”
“The bottom line is that debt counselling is an effective way for
over-indebted consumers to restructure their debt and the research
shows that those who complete the process will also benefit from an
improved credit score.”

DEBT REVIEW
When you call your Debt Counsellor
you may end up dealing with an
administrative assistant. They may
be able to help you with simple
administrative functions.
You should, however, keep this
in mind when asking for advice.
If you need to talk to the Debt
Counsellor, ask to do so or make an
appointment.

CONTENTS
DEBT REVIEW AND
YOUR CREDIT SCORE
THE IMPORTANCE
OF YOUR
CONFIRMATORY
AFFIDAVIT
BUSINESS
RESCUE TO
THE RESCUE
NEWS
BEWARE ANNUAL
INSURANCE
INCREASES
DISCLAIMER
Debtfree Magazine considers its sources reliable and verifies as
much information as possible. However, reporting inaccuracies
can occur, consequently readers using this information do so
at their own risk. Debtfree Magazine makes content available
with the understanding that the publisher is not rendering legal
services or financial advice. Although persons and companies
mentioned herein are believed to be reputable, neither
Debtfree Magazine nor any of its employees, sales executives
or contributors accept any responsibility whatsoever for their
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us by advertisers which does not necessarily reflect the views
and opinions of the Debtfree Magazine team. No person,
organization or party can copy or re-produce the content
on this site and/or magazine or any part of this publication
without a written consent from the editors’ panel and the
author of the content, as applicable. Debtfree Magazine,
authors and contributors reserve their rights with regards to
copyright of their work.

DEBT REVIEW
AND YOUR
CREDIT SCORE

DEBT REVIEW AND YOUR CREDIT SCORE
WHAT’S YOUR
SCORE?
How credit worthy are you?
How much credit should you be
given?
What rate should you be given credit
from a credit provider?
Will you actually repay your debts?
These are questions that credit providers want
the answers to, and that credit bureaus share
in credit reports about you. This info is also
quickly reflected in what is commonly called
your credit score.

DEBT REVIEW AND YOUR CREDIT SCORE
CAN YOU BE
TRUSTED?
When you rock up at a credit provider and ask them
to give you credit, it is hard for credit providers to
take you at your word when they ask you about your
current debt situation.
This is because most people who ask for new credit, already owe
money to other people.
This is one reason credit bureaus came into existence, so they track
how much debt you have, as well as how good you are at repaying
your debt.
Credit bureaus sell this information to credit providers who are
thinking of giving you credit so that they can make more informed
decisions about you.

DEBT REVIEW AND YOUR CREDIT SCORE
WHAT IS A CREDIT
REPORT?
A credit report is a snapshot of your
recent credit usage.
A credit report is a document provided by
a credit bureau with compiled information
about you, everything from your recent
employment and home address to who you
owe money to and how regularly you make
repayments.

DEBT REVIEW AND YOUR CREDIT SCORE
WHAT IS A CREDIT
SCORE?
A credit score is essentially a
numerical representation of your
credit-worthiness, indicating your
likelihood of repaying your debts on
time.
A credit score is normally a three digit number,
calculated on your credit history, payment
history, and credit utilization.
For most people, it ranges between 300 and
850 (in most countries) with a higher score
basically saying to credit providers that you
are better at repaying credit and handle debt
well.
In most cases the higher your credit score, the
easier it is to obtain loans and other financial
services, at a better interest rate.

DEBT REVIEW AND YOUR CREDIT SCORE
GETTING CREDIT
IN SA
In South Africa, people have a right to apply for credit
and not be discriminated against based on racial or
social background.
Credit providers who turn you down for credit, could be asked to
explain in writing the reason they turned you down.
The key factor on whether you can get credit or not is not your credit
score or what is recorded in your credit report, but whether or not
you can really afford the credit you are asking for.
If you cannot realistically afford to repay the credit each month, then
a credit provider is not allowed to give you credit, as they would be
acting recklessly (which is illegal).
To check if you can afford the credit you are asking for, a credit
provider will ask for proof of what your household income is, and
will also look at your other debt obligations. This is where your credit
report and your credit score comes in.

DEBT REVIEW AND YOUR CREDIT SCORE
WHO MAKES THESE CREDIT
SCORES?
Credit bureaus or credit reporting
agencies make credit scores. They
have common rules used by bureaus
around the world, but tweaked for
the local market.
These bureaus collect and analyse data
from various sources, including banks, credit
providers, and retailers, to generate credit
reports and scores.
In South Africa, there are four main credit
bureaus: TransUnion, Experian, Compuscan,
and XDS.
They are by no means the only ones and there
are, so far, 54 bureaus registered with the NCR
(in 2023) who might have information about
you.

DEBT REVIEW AND YOUR CREDIT SCORE
WHAT IS A GOOD CREDIT
SCORE?
In South Africa all four major credit bureaus (Experian,
TransUnion, XDS, and Compuscan) use the same credit
scoring system known as the FICO scoring model.
The FICO scoring model is widely used by credit bureaus and lenders
around the world, and is often seen as the global standard.
FICO scores range between 300 and 850 and are calculated based on
factors such as payment history, credit use, how long you have had
access to the credit, credit mix, and recent credit applications.
While each credit bureau may collect and report slightly different data
about the same person, the big ones all use the same FICO scoring
model to generate credit scores.
A credit score of 750 or above is considered ‘excellent’ and can help
you qualify for better loan terms and credit card rewards.
Of course, these days with almost half of all credit users being in
serious debt trouble and having missed payments, the majority of
people usually have a much lower score.

DEBT REVIEW AND YOUR CREDIT SCORE
HOW CAN YOU IMPROVE
YOUR SCORE?
Several things can improve your
credit score, including paying your
bills on time, reducing how much
credit you use, and keeping your
credit accounts open for a longer
time.
If you have a decent mix of different types of
credit and pay them regularly, this can boost
your score.
If you are able to use your credit and repay the
full amount each month, this is a good thing.
Avoiding frequent credit applications can also
boost your credit score (because you look less
desperate).
Debt Counsellor Roger Brown of Credit
Matters says that “Consumers can dispute
information that looks incorrect on their credit
report with the credit bureaus…sorting out any
mistakes there can help improve your score”.

DEBT REVIEW AND YOUR CREDIT SCORE
WHAT MAKES YOUR SCORE
WORSE?
It might surprise you to learn that not having any credit
accounts does not mean you will have a good score.
In fact, because credit providers don’t know how you handle credit, it could
result in a very low credit score. Credit scores can be 0 for those with no
credit history or usage.
It seems unfair but that’s how it works.
Several other factors can negatively affect your credit score. The biggest
being missing debt repayments. Credit providers don’t like that, and if you
have been missing payments this will really knock your score down.
Paying less than the agreed monthly debt repayment amount, or even
paying the full required amount a few days later than you said you would,
can drop your score.
Having fully maxed out accounts (or using most of your available credit) is
also something that negatively effects your score. Ironically, closing credit
accounts is also something that can lower your credit score.
Keep in mind that when you run around asking lots of different people for
credit within a short time, it can also make your credit score drop.

DEBT REVIEW AND YOUR CREDIT SCORE
DEBT REVIEW AND YOUR
CREDIT SCORE
If you have needed to start the debt review process,
then your credit score was probably not looking good,
because you were probably in debt distress. This would
have been reflected in your credit score and report.
Maybe you had lots of missed payments or late payments or partial
payments. You might have maxed out some of your credit accounts
and credit providers might have been turning down your new
applications for more credit.
With that as your starting point, debt review doesn’t hurt your credit
score or credit worthiness (since no one wants to give you credit
anyway) in any significant way.

DEBT REVIEW AND YOUR CREDIT SCORE
BUT WHAT DOES
HAPPEN?
When you apply for debt review and debt restructuring, the
Debt Counsellor lets the NCR know you have started the
process and they, in turn, notify the credit bureaus (via a
computer system).
During the time you are in debt review, credit bureaus will put a small
indicator in place (often called a flag) to tell credit providers that you are
getting rid of your debt, not taking on more debt.
Credit providers will not be quick to offer you credit, as this could be seen as
‘reckless’, which is illegal, and can land them in hot water with the National
Credit Regular (NCR) and even facing fines of R1 million and hurt the value
of their shares.
So, in many ways, your credit score doesn’t matter while you are in debt
review. It will, however, be something that you may want to improve after
you finish debt review, if you are thinking of using credit again in the future.
Debt Counsellor Roger Brown, points to this reality when he says: “it doesn’t
matter…until it does”.

DEBT REVIEW AND YOUR CREDIT SCORE
BUILDING YOUR CREDIT SCORE
AFTER DEBT REVIEW
Brown says that these days the credit bureaus are
better than ever in featuring correct information,
“things really improved with the introduction of the
National Credit Act”.
He explains that: “When a consumer successfully ends debt review,
we notify the NCR, who in turn notify the credit bureaus and the debt
review flag is then totally removed from the consumer’s credit report”.
It is always a good idea to draw a credit report a short while after your
debt review ends to see what it shows. If you see any record of the
debt review, then your Debt Counsellor can help by following up with
the NCR and credit bureau, or you can lodge a complaint and force
the credit bureau to update their records.
NOTE: If you drop out of debt review before it is finished,
then the flag remains in place until you pay off all your debts.
The record of your failed debt review may prevent you from
getting new credit until you sort out all your existing debt.
At the end of your debt review, you will probably have closed many of
your former accounts, and have no more debts so your credit score
may look a bit weak. You may want to start to rebuild your credit score.

DEBT REVIEW AND YOUR CREDIT SCORE
YOUR SCORE AND THE
RATE YOU GET
As mentioned before, if you can
afford to pay for credit, then
you should be able to get credit,
regardless of what your credit
history looks like.
If you were in debt review but paid up all your
debts then you will be able to get credit again.
Your credit score, however, will very much
influence what kind of rate you get on the
new credit you apply for.
A low score will probably mean a higher rate.
And the interest portion of credit is always the
part that hurts and really costs you money
over time.
So, having a better score can be beneficial if
you do want to make use of credit.

DEBT REVIEW AND YOUR CREDIT SCORE
GETTING BACK
IN THE GAME
If you intend to make use of credit to buy something,
perhaps something big like a house or a car, then it can
be beneficial to build up your score in order to get a
better interest rate.
In such cases, it may be beneficial to pre-emptively start rebuilding a
credit history. You could do this by taking out a small loan or applying
for a credit card and making regular payments on time each month to
establish a positive credit history, which will increase your credit score
over time.
When using credit, it is always good to “behave” yourself and be
responsible. As a bonus you can use some of the lessons you learned
during your debt review.
When you do get back into the credit usage game, focus on paying
your monthly instalments on time. Avoid maxing out your available
credit. Keep a little mix of different types of accounts and be sure to
pay the full amount that you agreed to. This will help keep your credit
score high.

DEBT REVIEW
Beware of calls from credit provider
collections agents who say things
like: your payment has not been
received”. They may not even work
directly for your bank.
They may also create the impression
that the debt review process is not
working. Be sure to get all the fact
from your Debt Counsellor, attorney
and your Payment Distribution Agent
before assuming the worst.

No more debt-stress.
Let’s get it sorted.
We’ll get your interest rates right down. You’ll
make one consolidated payment a month. You’ll
have more cash to live on. Your assets will be
legally protected. Sorted.
0861 365 910
www.debtbusters.co.za
info@debtbusters.co.za
NCRDC2484

THE
IMPORTANCE
OF YOUR
CONFIRMATORY
AFFIDAVIT

CONFIRMATORY AFFIDAVIT
IT’S ALL IN THE
PAPERWORK
If you have just entered debt review,
you will be asked to supply your
Debt Counsellor and your attorney
with many different documents, and
to sign lots of forms.
It can seem boring and time consuming, but it
really helps ensure that your Debt Counsellor
and attorney have all the right information and
that you understand what you are committing
yourself to.
Also, because debt review is a legal process
which goes to court or tribunal, you will be
asked to sign, what is called, a confirmatory
affidavit and then return it to your Debt
Counsellor and attorney as soon as possible.
So, just what is a confirmatory affidavit, why
do you need one, and how can you mess up
your entire debt review if you don’t send this
document back in time?

CONFIRMATORY AFFIDAVIT
DEBT REVIEW IS A
LEGAL PROCESS
The debt review process involves creating debt
restructuring proposals that are initially sent to your
credit providers (who can agree or refuse).
Their replies are compiled, and set out in legal documents that are
taken to a court or the National Consumer Tribunal (NCT).
It is ultimately a court that decides whether or not you qualify for debt
review (are legally over indebted) and what the debt restructuring
arrangement will be. They do this by referring to all those documents
you completed and signed, which were submitted by your attorney.
Other important documents will also be submitted to the court,
like your Debt Counsellor’s certificate (from the NCR) and your
application form, where you initially asked for help. There will also be
information about your debts and how the Debt Counsellor thinks the
debts can best be settled.
One of the most important documents that will be included in your
court papers is called a confirmatory affidavit.

CONFIRMATORY AFFIDAVIT
WHAT IS A CONFIRMATORY
AFFIDAVIT?
A confirmatory affidavit is a legal
document that confirms the
authenticity of a statement or fact
made by an individual.
In this case, the confirmatory affidavit
confirms that you:
1. Did ask the Debt Counsellor for help, and
2. Agree with the debt restructuring
proposal that has been created for you,
and
3. Agree with the things the Debt
Counsellor has said about your matter
and the plan.
This document will form part of the court
documents that are submitted on your behalf.

CONFIRMATORY AFFIDAVIT
HAVING THIS DOCUMENT
COMMISSIONED
Unlike a lot of documents that you
receive at the start of debt review,
this is not a document that you can
just sign and send back to the Debt
Counsellor or attorney. No, you
need to take an extra step.
To make the confirmatory affidavit
legally binding, you must sign it before a
commissioner of oaths.
A commissioner of oaths is a person who is
authorized to verify and witness the signing
of legal documents. In South Africa, members
of the South African Police Service (SAPS) are
authorized to act as commissioners of oaths.
One of the most popular ways to have a
document commissioned is by heading down
to your local police station and asking for a
officer (a commissioner of oaths) to help.
This takes time and effort.

CONFIRMATORY AFFIDAVIT
TOO MUCH LIKE
HARD WORK?
Many consumers make the mistake
of taking too long to do this,
because they do not want to go to
all the trouble of going to the police
station and potentially waiting in a
queue.
Many find it hard to get to the station during
suitable hours since they are busy working.
But finding excuses not to get the document
commissioned does not help. Instead it can
really harm your case, and throw all the
protection of debt review out the window.

CONFIRMATORY AFFIDAVIT
MAKING IT IMPOSSIBLE FOR
YOUR ATTORNEYS IS
BAD FOR YOU
Quintin Zimmerman of Liddles Attorneys says that
“as a debt review attorney, the greatest frustration
we experience in expeditiously issuing debt review
court applications is the delay in obtaining the original
confirmatory affidavits from consumers”.
In terms of the NCA regulations and the rules of court, the courts
require that the consumer’s original confirmatory affidavit must be
included as part of the issued court application.
The National Credit Act sets out a time period when people first start
debt review in which credit providers have to behave themselves, but
if that time period passes, then some nasty credit providers can try to
get out of the process.
While most credit providers like to cooperate with the debt review
process, they also want to get things sorted out as soon as possible,
and don’t want things to drag on and on unresolved.
Quintin says that: “from date of signing the Form 16, we (the debt
counsellors and attorneys) only have 60 days to get the matter to

court to prevent credit providers from being able to terminate the
debt review process”.
While debt reviews does not have to be put before a court within
this time period (it can be impossible for a variety or reasons) it is
considered by most attorneys as ‘best practice’ to do so.
This is because once the matter is set down in court, then credit
providers will not want to start a second lot of legal action (and waste
another courts time).
This means that set down matters help protect consumer’s assets,
and ensure better cooperation from credit providers (or recourse for
consumers if a naughty credit provider tries to cause problems).
Quintin has this advice for consumers: “when you receive the
confirmatory affidavit from the attorneys, be responsible and please
go as soon as possible to a commissioner of oaths to sign the
affidavit. A timeously issued debt review court application is for your
legal protection and peace of mind”.

CONFIRMATORY AFFIDAVIT
MAKE SURE YOU KNOW
WHAT YOU ARE
AGREEING TO
It is important to make sure that you
understand the debt restructuring
proposal before you sign the
confirmatory affidavit.
Read it (even though it is in some fancy
sounding court language) and see what it says.
Moreover, your Debt Counsellor should
explain the planned debt restructuring
proposal to you in detail, and you should feel
comfortable with the terms before signing the
document.
After all, this is what you are saying in the
affidavit. You agree with the plan and will stick
to it.

CONFIRMATORY AFFIDAVIT
MAKE SURE YOU
DO IT RIGHT
Once you have headed to the offices of a
commissioner of oaths (eg. an attorney or at the local
SAPS station) you need to make sure that you do
things right, or it can become a problem in a court
with a difficult Magistrate.
Attorney Rynhardt De Lange of MiLaw says: “when you have your
confirmatory affidavit commissioned, it is important that you make
sure each page is initialled and sign the last page in the presence of
the commissioner of oaths. The commissioner will then stamp the
document to confirm that it has been legally verified. Make sure their
full details are recorded on the affidavit”.
Here are more tips he offers:
• TIP: Don’t print the confirmatory document on back to back
sides of the same page. The courts don’t like that. Rather, print
each page of the document on its own piece of paper. You
can save the forests later.
• TIP: Sign in black pen. The courts like that. This is not the time
to get artistic.

CONFIRMATORY AFFIDAVIT
PLEASE SEND IT BACK
ASAP
Since the document has to be
included in the court documents
(which help keep your assets safe) it
is crucial that once commissioned,
you return the affidavit back to your
Debt Counsellor or attorneys as
quickly as possible.
The sooner you do it, the better. This will give
your Debt Counsellor and attorney more time
to submit the court papers and ensure that
the debt review process runs as smoothly as
possible.

BEWARE
ANNUAL
INSURANCE
INCREASES

ANNUAL INSURANCE INCREASES
THE DANGER OF
INCREASES
End balance differences have long
haunted the debt review industry.
Consumers and Debt Counsellors expect an
account to be paid up but the credit provider
shows an amount owing.
PDA calculations show the account should be
paid up but the credit provider insists on more
money.
While this can happen due to payments dates
and slight interest calculation differences
there can be a hidden reason affecting some
accounts.
Unnoticed annual insurance increases!

ANNUAL INSURANCE INCREASES
SNEAKY
INCREASES
It is not uncommon for an account
to have insurance built in. This may
be CLI or it may be on a bond. It is
also common for prices to slowly go
up or hopefully down over time.
Normally, when there will be a change to an
insurance premium, the provider should let
the client know. The client, in turn, should
let their Debt Counsellor know if they get
notification about such a change. Sometimes,
however, these increases can slip in unnoticed
by everyone.
This could be because of a failure to
communicate by the insurer or by the
consumer. Either way, the increase can throw
off the Debt Counsellor’s projected repayment
plan which is set out over several years. It can
have very negative consequences and cause
problems if this occurs.

ANNUAL INSURANCE INCREASES
For example, let’s say the Debt Counsellor arranges for an
account to receive R1000 debt repayment each month, with
the insurance portion being R100*
In this case R900 goes toward the debt (and interest portion)
and R100 goes to insurance.
Then, if the insurance portion later goes up by… let’s say R50
the next year, it begins to mess with the plan.
What happens is the money that should be going towards reducing
the original debt is less than expected and more funds are allocated
to the increased insurance. Progressively, month by month, the gap
between what you expect to happen (the original plan) and what is
actually happening gets wider and wider.
And every time the bank adds a new increase or adds extra interest,
that would not have been there before, the plan and reality get further
and further apart.
Because this can happen on big debts, like bonds, the insurance
figures for some accounts can be quite large. Thus, increases in
the insurance amount, if unnoticed and not adjusted for (with
increased payments by the client), can result in really big end balance
differences.
* We have really fudged these figures for simplicity’s sake. You get the idea though.

ANNUAL INSURANCE INCREASES
WHAT TO DO
ABOUT IT
Now, you may want to argue with the credit provider or
the insurance people about who should have notified
whom and when, but it may not change the end result.
The projected payments won’t be the same as what has
actually happened. This can leave consumers in debt
review angry and disappointed with everyone.
It might even tip a payment that was reducing the balance over time
into allowing the balance to slowly begin to increase (which is bad).
What many Debt Counsellors prefer to do is work with a FAIS
compliant service provider who advises the clients about their
insurance and maybe even change the insurance supplier to a more
affordable or suitable one, with better benefits for people in debt
review. These payments can then be properly allocated in the debt
repayment plan and PDA payments.
Whatever your policy is, this is something to keep an eye on or sneaky
annual increases can cause a lot of trouble.

BREAKING
NEWS
UNIVERSITY GRADUATES
WITHOUT WORK
At the start of 2023, more than 716,000 South African
university graduates applied for the R350 Social Relief of
Distress Grant.
The grant was initially introduced in 2020 to support those
who lost their jobs or income due to the Covid 19 pandemic
and lockdown.
This very high number of applications from graduates is
indicative of the challenges faced by young people in finding
employment at the moment. It is estimated that the current
‘youth unemployment rate’ is more than 46%.

FUNDING TERRORISTS
& ALLOWING MONEY
LAUNDERING
In February 2023, both South Africa and Nigeria were added
to the ‘grey list’ of the Financial Action Task Force, due to
shortcomings in their efforts to combat money laundering
and terrorist financing.
This designation means that banks and financial institutions
in these countries will undergo additional scrutiny and
compliance measures, potentially leading to higher fees for
consumers down the line.
Both countries will need to address the identified deficiencies
and demonstrate progress in improving their anti-money
laundering and counter-terrorism financing frameworks in
order to get off the list.
SA has already managed to action 15 out of 20 identified
areas, but these efforts were not enough to avoid the grey
listing as expected.

BUDGET SPEECH
HIGHLIGHTS
On February 23, 2023, South African Finance Minister Enoch
Godongwana delivered the country’s budget speech, which
focused on taxes and energy crisis.
It seems that once again SARS did a good job, and more
money than was initially expected came in, which will now
immediately be spent servicing debt and on new projects
(like hiring thousands of the very necessary cops).
Godongwana acknowledged the impact of load-shedding
on South African businesses and consumers and proposed
measures to address the issue. These measures include
incentivizing businesses to invest in renewable energy,
offering home owners tax rebates and introducing penalties
for companies that fail to meet energy efficiency targets.
Government will take on about half of Eskom’s massive debt
in an effort to free up funds for them to use to actually fix
and maintain equipment (instead of just paying off loans).
In some very welcome news, it was announced that
government would not raise income tax rates for individuals
or businesses this year, and will shift the tax bands to match
inflation.

There will be the usual small increase excise duties on
tobacco and alcohol products, and on sugary drinks, which
is almost a given these days. Almost as obligatory was the
announcement of billions of Rands worth of bail-out money
for SAA and the Post Office. Apparently, SAA is very close to
breaking even these days.
Other good news included the continuation of the R350
grant which millions of South Africans are receiving monthly,
since the start of the Covid-19 pandemic. The grant will be
around until March next year.
The Finance Minister also announced several other initiatives
to promote economic growth and create jobs, including
increased funding for small and medium-sized businesses,
investments in infrastructure, and the expansion of the
country’s digital economy.
It was seen as a fairly conservative budget that successfully
upset almost everyone in some way or another, and dealt
with most of the elephants in the room.

LEGAL
MATTERS
In a recent matter that was before the National
Consumer Tribunal which resulted from complaints by
a consumer the NCT was asked, by the NCR, to rule on
whether the Debt Counsellor had failed in their job.
There were a number of interesting points in the ruling* but one
thought that came out quite strongly was that consumers need to
cooperate with the debt review process.
Imagine someone suing their personal trainer for failing to make them
fit but the client refused to do any exercise.
Paragraph 62 and 63 were particularly interesting. They state, in part
(we added some bold to some text):
62. The responsibility of consumers is particularly important
when a credit provider does not accept a proposal from
the debt counsellor following consultations with the
consumer. In such an instance, the consumer must
participate in good faith in further negotiations with the
credit provider and comply with any reasonable request
by the debt counsellor to facilitate a responsible debt re-

arrangement plan with a credit provider. The Tribunal finds
that a request to contact the debt counsellor to discuss
alternative settlement proposals is reasonable. According
to the evidence before the Tribunal, the Respondent made
numerous attempts to contact the consumers as sampled,
to further engage in alternative settlement proposals where
credit providers did not accept the initial proposal. By
failing to respond and accordingly participate in good
faith in further settlement negotiations, consumers
contravene the Act.
63. The consumer’s responsibility to act in good faith
during the debt review process is similarly essential
in the proper execution of sections 86(7)(b) and 86(8)
(b). The Tribunal reiterates that these sections apply to
an assessment outcome that the consumer is not overindebted
but nevertheless experiencing difficulty satisfying
all his or her obligations under credit agreements in a timely
manner. Where a debt counsellor makes a recommendation
in such an instance, and this recommendation is not
accepted by all the credit providers, the debt counsellor
must [Emphasis added] refer the recommendation to the
Magistrate’s Court.
The ruling reminds consumers that they must communicate and
cooperate with their Debt Counsellor and must be open to making
changes to their lifestyle in order to pay off their debts.
* Over the next few weeks we will be mentioning other highlights from this
case ( NCR vs Munsamy) so be sure to visit www.debtfreedigi.co.za for more
information.

BUSINESS
RESCUE
TO THE
RESCUE

BUSINESS RESCUE TO THE RESCUE
BUSINESS
RESCUE
Every Debt Counsellor, at some time
or another, has received a request
from a consumer asking for help
with their financial difficulties only to
realise that the debt they are talking
about is not of a personal nature but
rather relates to their business.
Most of the time, we then have to inform the
consumer that we can’t help them. After all,
as Debt Counsellors, we specialise in helping
consumers with their personal debt.
But what if there was a way you could assist
them?

BUSINESS RESCUE TO THE RESCUE
WHAT IF YOU
COULD HELP?
No doubt you have heard about
and perhaps even researched a little
about business rescue. In many
ways it is like debt review but for a
company rather than an individual.
The essence of business rescue is to facilitate
the rehabilitation of a company that is
“financially distressed” by providing for:
the temporary supervision of the company
and management of its affairs, business and
property by a Business Rescue Practitioner;
providing a temporary moratorium against
legal action, even enforcement action by
creditors against the company;
developing and implementing (if approved by
creditors) a business rescue plan to restructure
a business’s affairs, property, debt liabilities
and equity
All that would be done with the goal of
achieving a better return for the company’s

creditors higher than what they would have
received if the company was simply liquidated.
“Business Rescue is Debt Counselling on
steroids” says Raynard McLaren, a Business
Rescue Professional from REM Corporate
Solutions. According to Raynard, who has
been involved in Business Rescue since back
in 2014, not all businesses would be able to
be rescued as there must be a reasonable
prospect for rescue and that would only be
able to be determined once a Business Health
Check has been done.
This is much like how Debt Counsellors do
a debt review or evaluation for consumers
but with all the businesses info and debts.
With some hard work and good planning, it is
possible to make a suitable and realistic plan
to vastly improve many businesses viability.
Raynard also says that the Companies Act
strictly stipulates the timeframe in which the
business rescue process must take place
which includes the formulation of a business
rescue plan on which the creditors of the
company must either vote to implement,
amend or reject. So, time is a factor.

BUSINESS RESCUE TO THE RESCUE
COULD YOU ADD THIS TO
YOUR SERVICE
If you are looking to expand your
offerings or would like to help
consumers with these types of
challenges, then you might want to
consider partnering with a reliable
business rescue professional.
It could be one of your extended external
service offerings to consumers, on a business
level to deal with their debts.
That way these consumers can get the help
their business needs and on a personal level
can also make use of your debt counselling
services too.
As a bonus, it can even help generate an
additional revenue stream for your practice,
which never hurts.
For more info about how business rescue works head over to
Google or check out www.remcorp.co.za

DEBT REVIEW
If you drop out of debt review you
will have to go back to paying your
original instalments or more (to
catch up).
Obviously, this is going to be
incredibly hard to do. You may also
find that credit providers even start
new legal action against you if you
cannot catch up fast enough. So,
rather stick with the process and
never miss a payment.