Debt relief measures for consumers struggling to repay their debt
Having trouble repaying your debts? Here’s how to manage your debt during the Covid-19 pandemic.
As South Africa grapples with the spread of Covid-19 and how to boost economic activity, many consumers are struggling financially and struggling to repay their debts due to reduced and total loss of income.
The National Credit Law (NCA) offers various debt relief measures for consumers struggling with financial difficulties and struggling to repay their debts and consumers are encouraged to consider such measures, if any, advises lawyer Kedilatile Legodi, Acting responsible: Education and communication at the RCN.
Here are the different NCA debt relief measures to consider:
Credit life insurance
Credit life insurance is an insurance that consumers take out when applying for a credit or loan. It covers outstanding debt in the event of unforeseen circumstances such as death, redundancy, unemployment, inability to earn income, disability and others.
In the event of unemployment or the consumer’s inability to earn income, borrower insurance coverage provides that credit organizations must settle the consumer’s debt for:
– a period of 12 months,
– the repayment period remaining to run,
– until the consumer finds a job or
– is able to earn income, whichever is shorter.
Consumers who would like to benefit from this relief measure but who are struggling to obtain help from their credit organizations can submit a complaint to the National credit regulator. However, it is important for consumers to remember that in order to qualify for credit life insurance, all payments regarding the credit life insurance contract must be up to date.
Debt counseling or debt review
Debt counseling is a debt relief measure designed to help over-indebted consumers struggling with debt, through budget counseling, negotiating with credit providers for reduced payments, extending debt. repayment term and debt restructuring.
Debt counseling also offers consumers protection against repossession or lawsuits by credit providers.
Consumers who have been negatively impacted by the effects of the Covid-19 pandemic resulting in reduced income are encouraged to consider this debt relief measure, as income is required to seek debt advice. However, before signing up for a debt counseling service, consumers should make sure that the process is understood in detail and its implications.
Handover of goods
The NCA allows consumers to voluntarily return (return) goods to credit providers when they can no longer afford to maintain repayments or can predict that they will not be able to maintain future payments.
Under section 127 of the CNA, credit agreements under which goods may be returned are installment agreements, guaranteed loans or leases. However, consumers are encouraged to understand the process before giving notice to a credit provider to return goods, Legodi says.
– The credit provider is required to provide the consumer with a letter indicating the estimated value of the good, 10 working days after the consumer has given notice to the consumer to give up or return the good, whichever is later.
– The consumer can withdraw the notice of redemption within 10 working days of receipt of the letter of estimated value if the account is not overdue.
– The credit provider will sell the returned goods in an attempt to settle the debt. However, there is no guarantee that the credit provider will sell the goods for what the consumer still owes.
– If the proceeds of the sale are insufficient to settle the unpaid debt, the consumer will be required to pay the shortfall after the sale. Consumers are also encouraged to privately sell goods they can no longer afford to reimburse in an attempt to get the best possible price, advises Legodi.
For consumers needing to borrow or lend money, they should do so taking into account their ability to repay debt and only use credit providers registered in the NCR. Consumers should never enter into agreements with unregistered credit providers who typically hold bank cards, SASSA cards, ID documents, etc. as collateral and method of collection. The retention of cards or identity documents is prohibited and constitutes a criminal offense within the meaning of the ANC.
Consumers are urged to report credit providers who hold these instruments to the South African Police Department and the NCR, Legodi concludes.
Debt counseling is offered by debt counselors registered in the NCR who operate across the country. For a list of registered debt counselors, please visit the NCR website at www.ncr.org.za or contact the RCN on 0860 627 627.