- Posted by: Admin
- Category: Uncategorised
I’ve been a debt counsellor for over eight years now and have worked with some extremely experienced, senior debt counsellors in my time. One of which, who is my current partner, Johan Wepener, who also just so happens to be the top debt counsellor in our category for the past couple years running, awarded by the ‘Debt Counselling Association of South Africa’.
Johan and I most certainly have seen our fair share of irresponsible debt counselling practises and have heard crazy stories about what some of these debt counsellors get up too. Sadly, we have also received many transfers (unhappy clients from other debt counsellors) over the years who have been neglected and abused, for the lack of a better word, by their previous debt counsellor.
Fortunately for them we were able to a large degree, do some damage control.
But the whole point of this post is that it should never get to a point where ‘damage control’ needs to be implemented.
Therefore, I’ve listed the top five irresponsible practices that we have come across in our experience, and what has caused a nightmare for some consumers and our now current clients, prior to them joining us.
Here are the top five debt counselling traps you need to avoid.
- Quoting you ridiculously much lower installments than what your current monthly debt obligations are
Our economy has taken a beating since covid and with all the macroeconomic influences that have caused commodity prices to skyrocket which has had a negative impact on the cost of living, this just further puts a huge strain on our budgets.
Everything from food, water, electricity and petrol has shot through the roof recently with little respite ahead, leaving thousands at a point where they now have to start choosing which accounts get paid this month, and which don’t.
Homeowners and consumers who have high amounts of unsecured debt are especially facing challenging times with the interest rate hikes on top of everything.
Many of these debt management companies are aware of this and of the strain that South African consumers are currently under, and instead of doing what they’re in business to do, which is to bring relief to the over-indebted consumers who are under financial duress, they’re taking advantage of them.
One of the ways they do this is by getting their teams to give clients unrealistic quotes on what they can get their monthly debt repayments reduced too.
Or as they phrase it, what they can ‘SAVE’ the over-indebted consumer every month!!
Now you may be thinking, isn’t that what debt management companies are supposed to do?
In essence, yes, that’s exactly what we do, but there’s a responsible way to do this!!
These companies promise clients up to 70 or 80 percent off their monthly debt repayments, or as you often see on social media, they even promise to have your debt written off.
So now the client who is already under financial duress jumps at this wonderful offer because all they are thinking about is the thousands of rands they are saving each month.
Once the client accepts this offer and all the paperwork is processed, the problems begin.
After a month or two, the client gets a very abrupt email (often not even a phone call) stating that they now have to unfortunately increase their installment by a few hundred or even thousands of rands per month.
Naturally, this will come as a huge surprise, or even shock to the client, because as far as they’re concerned, the installment they were quoted in the beginning is what they thought they’d be paying until the end of their term.
There are many variables that go into the negotiation and restructuring process, so I don’t want to get too technical, but essentially, what some of these debt counsellors do is quote you a ridiculous amount, for the sole aim of luring you in so that they can get you onto their books.
All it is, is just a marketing tactic, albeit, a very bad one with dire consequences.
As debt counsellors, we have two main objectives, and that is to ensure that we restructure your debt that is first and foremost affordable to you, and secondly, which is acceptable to your credit providers.
We have a fiduciary responsibility to ensure that you can comfortably afford your debt repayments again, while simultaneously being able to get through the month, having all of the essential expenses covered.
If either one of these two objectives is not achieved, there cannot be a successful debt review (debt restructuring process).
So, the imbalance and where these debt counsellors are being irresponsible comes in is, they’re not providing offers (proposals) to your creditors that are acceptable. As a result of this, the creditors reject their initial proposals, leaving them coming back to you and asking for more money than they had initially quoted you on.
So now they end up creating another problem for their client, which they really don’t need at this stage.
Yes, our whole process is a negotiation, however, if done responsibly, there rarely will be counter proposals from your creditors.
Because even though we at Exonerate don’t quote you ridiculous amounts of savings per month, we absolutely ensure that what we will be negotiating on your behalf, is what you can afford. (Based on the information you submitted to us in your application)
So now the consumer is left in a predicament, because as you can imagine, they have already budgeted for this initial (quoted) amount and planned their lives accordingly.
So please be very careful when you’re quoted a figure that seems too good to be true.
If it sounds too good to be true, it most likely is!!
2. Not having a proper telephonic or in-person consultation with you
After your conversation with your chosen debt counsellor, whether it be in person or on the phone, if you are not left feeling 120% comfortable with the process and how it will affect you, something is very wrong!!
If I had a rand for every time I have spoken to a consumer who was placed under debt review, but had no and I mean no clue as to how the process actually works…
I’d be a millionaire.
Okay, maybe that is just a bit of hyperbole on my side, but I would have amassed a few thousand rands by now.
It annoys and sometimes infuriates me how these call center agents and (very seldom) debt counsellors who do telephonic consultations, just rush through the call to simply get them signed up as a client.
Clients end up not knowing how this is going to affect them, how long their term potentially could be, how the interest works, what will happen to their current accounts and credit facilities, how the legal process works etc.
All because the agent or individual whom they spoke with over the phone, just wanted them to sign on the dotted line.
And when the client wants to ask a few questions afterwards, they can never and I mean NEVER find the person whom they initially spoke with.
This not only shows a lack of responsible debt counselling, but a blatant lack of passion and diligence in helping struggling South African consumers, which is exactly what we debt counsellors are supposed to do.
I have no problem with telephonic consultations, as Johan and I do 90% of our consultations telephonically, but we ensure that we take our time.
Our objective when we’re speaking to a potential client, whether the consultation be on the phone or an in person, is to get the consumer to fully understand the debt restructuring process and how it will affect them.
This is known as ‘Debt Counselling’, where we educate and inform the consumer, thus empowering them to make a financial decision pertaining to their debt.
Our objective is to put the consumer in a position to make the best possible decision for them and their family, not so that we can benefit.
If you are not feeling comfortable after your consultation, knowing exactly what the process entails, the legal aspect as well as the fee structure, then proper and responsible ‘Debt Counselling’ most likely did NOT take place!!
3. Consultants coming across as very salesy and pushy over the phone
It amazes me how some debt management companies have taken something that is supposed to be so private and personal, and made it as impersonal as can be.
You can tell within the first five minutes whether the company you’re wanting to help you manage your debt, actually cares about you or not.
Take very careful note of how they handle your situation and if they practice responsible debt counselling as stated above.
Then also take note of the amount and quality of questions they ask you…
A good debt counsellor will show genuine and sincere interest in you and your situation and will want to find out where you were (financially), where you are now (struggling) and how you got to be in a position where you’re struggling.
They will also practice patience and encourage you to ask as many questions as possible, as this will give them the assurance that you understand the information that they are giving you.
Be very weary of debt counsellors who just immediately talk about them, their company and what they can offer you. Yes, obviously this is important, but you want to be left feeling no pressure and not like you’re being coerced into becoming a client.
Based on the information they receive from you and your current situation or circumstances, they will advise what the best options for you will be.
Good debt counsellor DO NOT SELL ‘Debt Review’…
You need to feel empowered to make the decision on your own, and not left with any doubt as to whether you’re making the right decision or not.
The presence of doubt is always, and I mean always a bad sign.
4. Forcing you to go under debt review when you may not even need it
It never ceases to amaze me how many times I speak with consumers who are wanting to transfer over to us from their current debt counsellor because they are unhappy with lack of service they are receiving.
I am shocked to hear and see that many of them were never even candidates for debt review in the first place, since they had such a small amount of debt.
Now, technically, you can apply for debt review, regardless of the amount of debt you have, but this right here makes the difference between a good debt counsellor, and a not so good one.
A good debt counsellor will, after establishing the amount of debt you have, freely advise you on alternative debt management mechanisms or encourage you to do your own mediation.
For example, if you have less than R50,000 worth of debt, you really don’t need debt review.
So you know when a debt counsellor is just SELLING you ‘debt review’, you know something is up.
This alone is probably one of the top 3 causes of consumer distrust in our industry, because all some of these irresponsible debt counsellors care about, is making money.
For the sake of integrity, I’m a businessman too and I don’t run Exonerate as a non-profit, so I need to make money too, however, as I alluded too earlier in this post, there is a responsible way to do it!!
5. Not being openly transparent and honest with you
I’m always talking about the biggest myths in and around debt counselling as many of those misconceptions prohibit so many consumers who actually NEED debt counselling, from applying for it…
One of the biggest myths is that debt counselling takes 5 years.
This is absolutely not true and in my honest opinion, the only reason debt counsellors or agents don’t tell consumers this, is again because of money.
You see, the longer you are a client of theirs, the more money they make in service fees.
Now the service fees may be small, but if you add them up annually, and over a five or six year period, that adds up to quite a few thousand and in some client cases, tens of thousands of rands.
Multiply that by five hundred or a thousand (depending on how many clients they have on their books) and you’re in serious business!!
It’s actually a value of ours at Exonerate to get our clients debt free (out of debt review) as quickly as humanly possible.
Having this approach has served me well and we have gained the reputation of being a trusted and respected debt counsellor.
I can go on and on but this post is already longer that I would have liked, but I hope you get the gist of what I’m trying to get across to you.
Please ensure you do your homework and when you go for consultations, DO NOT GIVE ANY VERBAL OR WRITTEN CONSENT until you are 100% sure and happy that they are the company you want to walk this journey with.
I hope this post helped you and if you found any value in it at all, please show me some love by sharing it with family, friends and colleagues, as you never know who you could potentially be saving from a nightmare ahead.
Best wishes to the last couple months of 2023.
Cheers to your financial independence…