Debt counseling can also be named as credit counseling. The person who provides such advice is known as debt counselor & is a highly qualified person. The work of debt counselor is to have a complete idea of the financial position of the person before giving any advice. The National Credit Act introduced debt counseling during 2007 for providing debt advice to consumers. It is the process under which guidance is provided regarding debt management and budgeting. The consumer is guided to resolve their problems regarding debt & take wiser debt decisions.
Steps followed under Debt Counseling Process
The debt consultation can be provided through telephone, e-mail or in person depending on the parties involved in this process. Following steps are required:
The customer will fill the application form providing details regarding credit providers chosen by him.
The debt counselor will check the financial position of the customer. If a customer is over-indebted, he will qualify for debt review. A debt counselor can determine the financial position by checking the expenses incurred & income earned by the customer.
The credit providers mentioned in the application form shall be informed that customer is under debt review & they will be requested to give Certificate of Balance (COB) to debt counselor regarding customer's account. No legal action shall be taken up to 60 working days when the debts are under review. Customer will be liable to pay affordable reduced amount to all credit providers. The amount will be paid monthly & will be on the provisional basis.
The payment plans will be restructured on receipt of COB from credit providers. The negotiations shall be made with all credit providers & on the basis of such negotiations, a revised plan will be framed. The payment from now onwards shall be made as per this plan & this plan shall also be informed to all nation 21 online loans providers.
Such revised payment plan shall be converted into court order with the help of Attorneys, who will file an application in the court. Debt counselor shall attend the hearing on behalf of the customer as he will treat himself as an applicant in this case. The customer will present in the court only if his presence is demanded by the magistrate. The customer is required to follow the payment plan default of which may lead to legal action taken by credit providers.
Few important things every customer should know about debt counseling
Debt counselor does not always works as per the expectations of the customer. The customer is required to have a full understanding of his responsibilities & rights granted under NCA act before hiring the services of a debt counselor. Following things must be kept in mind:
The customer must be qualified for debt counseling. The over-indebted positions of the customer where he cannot meet his financial obligations make him qualify for debt counseling.
The services provided by debt counselor are not free of cost. They will charge some amount that is already prescribed under the Act. A counselor cannot charge more than the fees mentioned in the Act. Fee structure is:
Application fee : R 50
Rejection fee : R 300 (excluding VAT)
Counselor fee : R 6000 or first installment of payment plan whichever is lesser ( excluding VAT)
After-care fees : 5% of monthly installment of the customer to a maximum of R400 p.m. up to first two years. After that percentage shall be reduced to 3% until all debt amount is paid.
Debt counseling does not offer full safety from creditors. The credit provider can withdraw from the debt counseling process after 60 days & can initiate legal action against the customer. The reasons for such withdrawal could be no court order has been obtained, and the customer is making short payments.
The customer is also liable to pay interest amount & collection cost in case of any failure to make repayments. This interest amount & collection cost shall be paid in addition to the debt amount. However, the total amount should not exceed the unpaid balance of debt outstanding with the credit provider.
The customers who have applied for debt counseling are not eligible for more credit & debt counseling status is recorded in credit records kept by credit bureaus until the customer is under debt counselor's guidance.
The customer's responsibility of debt does not end after hiring the services of a debt counselor. The customer should not adopt such attitude that their responsibility is over after handling their debt case to a debt counselor.
So do not just rush towards debt counselor, do proper research, know their expertise & then make a choice. You should not back out from your responsibility and do not just believe what is advised by the counselor. Use your brain along with the guidance of counselor so that debt problems can be resolved effectively.
The credit provider shall provide notice
to the customer known as Section 129 notice which implies that legal action has been taken against the customer & he cannot claim the protection from debt counselor. There should be a proof of delivery of Section 129 notice with the credit provider.