Does Debt Counselling Increase Your Debt..??

Sadly, there have been many cases where unscrupulous debt counsellors have defrauded consumers by not paying their clients’ accounts and somehow racking up all their clients’ payments, for themselves…

That’s plain fraud and many of them have been prosecuted, deregistered, and banned from practicing debt counselling ever again…

Then there’s the proverbial incompetence cases, where you have a debt counselling company which probably only has one registered debt counsellor who knows what he or she is doing, and the rest are all call center agents, or incompetent administrators.

These agents make a total mess of things by first and foremostly, not practicing responsible debt counselling.

They don’t inform and educate the consumer on the entire process of debt review, nor do they explain how this process will impact the consumer.

They fail to explain the fee structure properly and clearly, as many consumers are baffled and surprised at the fees they have to pay and get a total shock when they see the debt counsellor fees on their statements.

Now the problem isn’t the fees, the problem is that they were never taken through the fee structure and explained how the debt counsellor will get paid, and only see the fees towards the debt counsellor for the very first time, once they get their first statement.

Obviously, this will come as a surprise to anyone…

When they were initially supposed to be taken through the fee structure before they even got started on the client’s application.

There are so many aspects of this debt management process that gets left out, simply because the call center agent is only thinking of their targets for the day, and once the current client’s application is in the bag, they swiftly move onto the next one.

Now, just let me emphasis this again…

I have no issues with and nothing against call center agents, I think OUTsurance call center agents are the epitome of what a call center should be like and they have perfected the call center model from a business perspective, if you ask me…

The problem I have is that the business model that some debt counselling companies operate on, is totally messed up.

These guys are causing more problems for our industry than the problems they’re supposed to solve, if you catch my drift.

To give you an example, at one stage in 2019 and just before covid19 hit in 2020, almost a third of my client base were transfers from other debt counsellors because they were unhappy because of not getting the service they were paying for…

Yes, transfers from other debt counsellors because they made a total balls up (for the lack of a better phrase) with their existing clients.

Some of the issues their clients had were that their proposals weren’t done properly, they were never explained the entire process of debt counselling, I mean, everything you can think of that could go wrong, went wrong some of these individuals.

And every time an incompetent or unscrupulous debt counsellor messes things up for a consumer, they do harm to our industry and portrays it in a bad light.

When in fact, most of us do really good work by getting over-indebted consumers back on their feet again through restructuring their debt, prevent bank repossession of their cars and houses and help manage their debt to the point where they eventually become debt free and financially independent again.

Even as recent as this year in July, we had a client whose debt was restructured, no formal debt counselling took place with the client, and the clients debt review repayment, was a whole almost 60% of her salary…

Now correct me if I’m wrong, but the whole bloody point of working with a debt counsellor is to get financial relief firstly, and then secondly, to have a financial debt management plan in place to get you debt free and financially independent again, as quickly as humanly possible, right…??

Well apparently, this is a foreign concept to some debt counsellors out there…

I could not believe what I was seeing…

So much so, to the point where I almost reported them to the NCR!!

They neither dealt with that client’s application nor did they attend to any after care services (which they are responsible for) to the client.

When the client tries to get hold of someone to assist via email, they wait patiently but never get a reply, and when the client calls in and wants to speak to the agent who assisted them because they have a query on their account, they get told that unfortunately the agent no longer works in that department or has left the business entirely.

As a result of some of the above, this can lead to a consumers debt increasing while being under debt counselling, but as you can see, it has absolutely nothing to do with the process of debt review, and everything to do with poor management and incompetence.

With all of that said, here are the exceptions when being under debt counselling, can result in your debt increasing…

Initially, when a consumer applies for debt counselling and all initial proposals are made and accepted, but then the consumer pays less than what the initial and accepted proposals agreed upon were.

This then results in creditors receiving less than what was agreed too, and they then decide to terminate, and exercise their rights to enforce the obligations of the original contact. This means that the consumer is now being charged for interest on the account, which is accrued daily.

As a result of this, the consumers accounts increase, all due to interest on arrears as well as the outstanding balances.

The other reason when a consumers debt can increase when they are under debt counselling is if they default, for whatever reason, on their new, restructured contracts which have been revied.

In this event, the same will apply where creditors will enforce their rights by most likely terminating the accounts from debt review, however, the consumer will still be listed as being under debt review.

The consumers debt will therefore increase as creditors will revert to the original contractual agreements, along with the original interest on those accounts.

So the whole debate about debt counselling or the process of debt review actually increasing your debt, is in and of itself, not true.

The only time your debt will increase when you are under debt counselling is if your debt counsellor messes up, or if you as the consumer messes up.

But the process of debt review itself, is not designed to increase your debt.

I hope this post helped and if you have any further questions or queries, please do not hesitate to reach out to me via email at andre@exonerate.co.za

Have a great day further…