Debt Counselling Is Expensive… Or Is It…??

Debt Counsellors get paid in three potential ways…

Before I go on to explain how exactly debt counsellors get paid, please note that registered debt counsellors who operate legally, within the parameters of the NCA (National Credit Act) are regulated by the NCR (National Credit Regulator).

They get audited annually, and pertaining to how debt counsellors get paid, their fees are also regulated and capped by the NCR.

So, there is no room to abuse or take advantage of vulnerable consumers who are under financial duress.

Now, let’s get stuck into how debt counsellors get paid…

First and foremost, all debt cousnellors are allowed to charge an admin fee of R50 and a consultation fee of R300.

The R50 admin fee is for completion and submission of the Form 16, which is the application form for formal debt counselling.

The R300 consultation fee is for, well, just that, the consultation…

The reason here is a fee is twofold, firstly, not all consumers who apply for formal debt counselling either A, need debt counselling or B, qualify for formal debt counselling.

Let me elaborate…

1. They may not need to go under debt review because they don’t have an excessive amount of debt. Perhaps the consumer just needs a little mediation or advice on how to better manage their debt, or a solution to get them back on track within the next three or six months. The process of debt review is designed for a consumer who has a lot of both, unsecured as well as secured debt. For example, a consumer may be struggling to pay their car and bond, and have mountains of credit card debt, personal loans, and store account debts. Debt Review can prevent the consumer from losing their car and house, as well as better manage all their unsecured debt as the bulk of the interest on the unsecured debt can be eliminated through the debt review process.

Or.

• The consumer doesn’t qualify because they could have too much debt and not enough money to pay a decent restructured proposal. This is common with consumers who have businesses as well, but used money from their business to take on personal debt. Although this is not the norm, it is important to know that not everyone has a 100% chance of qualifying, but it is very important that you do seek the advice of a professional debt counsellor if you are struggling with debt.

This is also why it is essential that you do proper research when you decide to seek the advice of a professional, competent debt counsellor.

It’s imperative that you find a debt counsellor who practices ‘Debt Counselling’, and doesn’t just want to sell you their services.

This is where a consultation takes place, either in person or over the phone, and the debt counsellor establishes where you were financially, where you are now and how you got to be in this position where you’re struggling with debt.

Based on the information you give the debt counsellor, now their job is to advise what they believe, pertaining to your financial circumstances of course, what the best way forward for you is.

Please don’t fall into the trap of speaking to a call center agent who is only after your money as they’re chasing daily targets, and don’t care about your financial well-being.

I don’t have anything against call-center agents, however, in our industry, many of them have created a world of problems in that they do not practice proper and responsible ‘Debt Counselling’.

Okay, back to the fee structure and how debt counsellors get paid…

Along with the admin and consultation fee, your debt counsellor is also entitled to a restructuring and renegotiation fee, which is pretty much where debt counsellors’ bread and butter comes from.

The ‘restructuring fee’ as it is more commonly known, is for the following services:

• Proposal preparation to creditors (your new affordable repayment plan)
• Loading your repayment plan on the PDA (payment distribution agency) profile
• Negotiating with your creditors
• Submitting the final proposals (that both parties agree too)
• Drafting of the court or NCT (National Consumer Tribunal) orders

As you’ve noticed by now, there is a lot of administration that needs to take place, just like with any important task.

The reality is that debt counsellors are literally responsible for restructuring all your credit agreements (contracts) with your creditors.

Then lastly, debt counsellors are also entitled to an ‘after care fee’…

This ‘After Care Fee’ is for the following services:

• Quarterly or annually reviewing your financial situation
• Attending to payment queries
• Issuing paid up letters and clearance certificates
• Updating the DHS
• Addressing all queries by creditors
• Attending to all their clients’ queries

Your debt counsellor is responsible and has a fiduciary responsibility to ensure that you get all the above, and more, when it comes to your debt.

So many debt counselling companies promise you the world, and once your first and second payment has gone through, you never hear from them again!!

I know this is common in many industries and with many service-based businesses, however, you need to understand that you are going to be working with this company for at least one year, depending on your financial situation and amount of debt you have, it could be a couple years.

So, you need to ensure you do proper due diligence and research, because you don’t just want a debt counsellor, you want a business partner who is going to walk a real and personal journey with you, and with whom you can build a good relationship.

Now that you have an in-depth understanding of exactly how debt counsellors get paid, I can now address the purpose of this blog post, which is that many consumers have the belief that,

“Debt Counselling is expensive…”

If you take into consideration, who debt counselling is for, and consider the opportunity cost and marginal utility, potentially losing your car or house, and what you’d still be liable to repay the bank, even after your assets was repossessed and auctioned off, from that perspective, debt counselling is not at all, expensive.

You just need to weigh the pros and cons…

I have had so many young people over the years who refused to make use of my services, even after I’ve advised that it is the best mechanism for their current situation, be adamant that they would find another way.

Only for them to reach out to me months later, where they now expected me to somehow work a miracle, as the banks want to come repossess their car.

Sadly, since they procrastinated way too long, and allowed the legal process to be well underway, the banks repossessed their cars.

What’s even worse, is the fact that after the bank sold off their cars, they still owed on their initial contract.

Many of them to this day, have no vehicle, but are still paying the banks back!!

This, ladies, and gentlemen, is not a situation you want to find yourself in, ever!!

So, in my opinion, and I assure, as a qualified debt counsellor who works with literally one of the country’s best top 5 debt counsellors, I am not biased.

I will never advise a consumer to go under debt counselling when they simply do not need it, and I will always be honest and transparent in my dealings, as that’s just the person and type of businessman I am.

So, I can comfortably say, that for a consumer to whom debt counselling is suited, it is not at all expensive…

The nice thing about this process is that there are no upfront or additional payments that need to be made.

Everything is already worked into your monthly debt repayment installment.

I hope you found this post informative and educational, and if you have any further questions or queries, please don’t hesitate to reach out to me via email on andre@exonerate.co.za or through our social media accounts.

Cheers to your financial independence…

André Misrole