Contact your bank first should you be in financial difficulty

 

The current economic climate has created extreme pressure on consumers’ ability to honour their financial obligations. Too often, this has resulted in uninformed, cash-strapped consumers responding to opportunistic advertising messages from debt counsellors promising that they have the solution to relieve their debt problems.

Since the implementation of the National Credit Act in June 2007, a private individual suffering under the pressures of over-indebtedness and who earns a regular monthly income can now apply for a formal debt review process by consulting a Debt Counsellor for assistance. A consumer is over indebted when, after paying for essential living expenses such as food, transport and insurance, he/she has insufficient funds available to cover monthly debt repayments. The Debt Counsellor is responsible for determining if a consumer is over-indebted or whether he/she will be struggling to meet financial commitments to creditors in the future. Furthermore, they need to present a proposal to the lenders for debt re-arrangement on behalf of the consumer.

However, debt counselling is not always the best long-term solution and consumers must ensure they are fully aware of the advantages, as well as the disadvantages associated with the debt counselling process. The debt counselling process is a serious matter and although it allows consumers, if they qualify, to repay their debt at reduced monthly installments, it will take them much longer to pay off all their original debt. During the debt counselling process consumers will also be prevented from accessing any further credit.

Consumers must, regardless of their financial institution, always approach their bank first should they be in any financial difficulty, or foresee any difficulty in the future, before seeking alternative solutions, says George Nyabadza, General Manager Marketing.

“Over committed consumers are especially vulnerable this time of the year and can easily fall prey to misleading advertising messages”, says Nyabadza.

According to WesBank they receive complaints on a daily basis where consumers have suffered a loss due to negligence and mismanagement of their affairs by debt counsellors. Another general complaint is where debt counsellors, after receiving their fees, do not always complete the debt review process, as their fees are paid up front and the consumer’s problem is therefore not resolved.

 A common mistake consumers under debt review often make is to entrust their debt counsellor with the duty of distributing their funds amongst their various creditors, instead of insisting that a payment distribution agent is appointed for this purpose. This has too often resulted in consumers losing money.

 “Where a consumer’s only solution is to approach a Debt Counsellor, they need to ensure the person is registered with the National Credit Regulator. In addition, registration as a member of the National Debt Mediation Association would be recommended, as the counsellor will be equipped to assist them with budget advice, support and mediation with financial institutions and other credit providers”, says Nyabadza

WesBank further wants to advise customers under debt review to keep up with their monthly insurance premiums. In the event of a total right-off of the vehicle due to theft or an accident, the customer remains liable for the full outstanding debt on his/her finance agreement, adding further financial pressure if the vehicle is un-insured. It is also important for consumers receiving a monthly car allowance to continue to use the full allowance towards paying off their vehicle installment.

“We appreciate these are exceptional times and as a result WesBank has invested in special call centres and new methods of assisting customers to cope with the strain of their debt”, concludes  Nyabadza.