During 2010 the National Credit Regulator together with various
stakeholders in the credit industry, appointed a task team
particularly to investigate the debt review process and to consider
and formulate proposals to address problems identified in the debt
counselling process pursuant to that investigation.
During August 2011, the NCR issued a statement that, following the
aforesaid investigation, a new system had been proposed for
introduction in order to standardise the manner in which debt
counsellors assess applications for debt counselling and draw up
proposals for over-indebted consumers.
The intention is to assist with the efficiency of the debt review
process and to keep debt review cases from landing up in court as a
result of inconsistencies and/or problems and/or delays.
The proposed new system is known as the Debt Counselling Rule
System. It aims to standardise the way proposals are drawn up and
afford the debt counsellor, the consumer and the credit provider
certainty and reliability in the debt counselling process. For it
to be effective, rules will need to be applied by the debt
counsellor to produce standardised outputs and documentation.
After much deliberation, an entity (endorsed by the Debt
Counsellors Association of South Africa, the Payment Distribution
Association of South Africa, the Credit Technology Association and
the Credit Providers Association) known as the Central Rules Engine
(CRE) has been established.
The System comprises a number of formulas which can be utilised by
debt counsellors who log onto the system and submit affordability
assessment and restructure proposals. Credit providers will also
then be able to log onto the system to ensure that the proposal has
been approved through the System. The System will assist with
decisions as to whether a consumer is indebted, the affordability
and probability of proposed repayments being made to credit
providers, and assist in determining whether a consumer can be
This set of standard restructuring rules is aimed at ensuring all
debt counsellors submit restructuring proposals that follow an
agreed set of principles. The reciprocal offering is that credit
providers, which receive proposals following this agreed set of
debt restructuring rules, will accept the proposals and in turn
ensure that consumer over-indebtedness is effectively
Software vendors will need to upgrade their systems
The introduction of the System coincides with a decision by the
Constitutional Court in terms of which a consumer was refused leave
to appeal a decision of the Supreme Court of Appeal. The SCA found
that a credit provider has the right to terminate the debt review
process after a period of 60 days on condition that the consumer is
in default, irrespective of the fact that the debt review concerned
has been referred to the Magistrates Court for a rearrangement
order. Once the credit provider terminates the debt review, the
credit provider can enforce the credit agreement placing consumers
at risk of losing their assets in the event that 60 days have
lapsed since they applied for debt review and their debt
counsellors have not yet obtained an order for a rearrangement of
This judgement makes it very clear that debt counsellors and
consumers have to ensure compliance with the relevant time frames
prescribed in the Act and debt counsellors must file their
applications for their clients' rearrangement orders as soon as
possible and/or obtain the consent of all the credit providers to a
proposal as soon as possible.
The proposed System will go a long way to assist in doing this and
to avoid the lapsing of time which could have negative consequences
on an over-indebted but otherwise blameless consumer, who could
suffer an execution against her assets merely because of a delay by
a magistrate to make a rearrangement order or by the debt
counsellor in bringing the relevant application to court.
It should be noted that the case of the Supreme Court of Appeal
does not oust the operation of the NCA where a substantive
application is made by a consumer to review a debt review
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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