Under debt review and can’t afford to pay?

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Through the years that debt review (or debt counselling) has been in our market, it has always been difficult for a consumer who genuinely cannot afford to pay their installment, to get assistance. When going under debt review, a court order is granted, and only the court can relax or vary the terms of the order. Even if the creditors, debt counsellor and consumer all agreed, you would still need to go to the court to change the order, otherwise, there is a default and the creditors will end up terminating.

A process was developed in the industry, called the Form 17.3 – Change in Circumstances notice, which has been widely used, but never received universal acceptance. Until now that is; Debt Counsellors have recently been sent a Circular (Circular 3 of 2020) by the NCR with guidelines on the implementation of the Form 17.3. This is obviously in response to the current COVID-19 crisis which the country (and world) finds itself in, and to assist the many consumers who are already under debt review.

While the NCR has issued this circular and a guideline on it, and even encourage credit providers to act in good faith when they receive one of these forms, they also make t clear that the act and regulations still take preference. This means that this guideline, while encouraged, cannot be enforced. The plan is to amend the act and regulations when time allows.

Types of 17.3

The guideline makes distinctions between the “types” of Form 17.3 documents that can be issued, these are;

  • Where a matter is not yet before court or the tribunal
  • Where matters are before court or tribunal, but no order granted yet
  • Matters where the order has been granted

A further distinction is made between a permanent or temporary change in circumstances.

A Form 17.3 can now also be used to advise credit providers of the death of a consumer or their spouse (where married in community of property).

The process itself is merely a notification to creditors of a change in the consumer’s circumstances. There are too many variables to draft an article or guidelines on what will happen for each matter.

It’s a given though that a change in circumstances can bring about either a short-term or a long-term change. These are mentioned in the guidelines and differentiated by the length of time. Anything under 3 months is viewed as short-term. Anything longer will be long-term.

The envisaged process

The plan is very simple, where a consumer undergoes a change in circumstance, they report that to their debt counsellor. They will need to provide documentary proof of the change. Where there is an insurance policy in place that covers the event that has taken place, a claim needs to be processed and any benefit received must be taken into account.

If the credit provider has provided the insurance policy, they must assist the consumer to claim against the policy.

Credit providers are requested to respond to these notices within 10 business days. Where no response is received, the debt counsellor is to proceed with the necessary steps in line with the existing act and regulations.

Example

Temporary loss of income

Examples of this are temporary injury or illness, maternity leave, or the current example, COVID-19 reduction in income.

The process in this example is;

  1. Notification and proof

    – The consumer will notify the debt counsellor and provide written proof of the cause. For example, a letter from a doctor or employer (in the case of reduced time).
    – A letter from the employer confirming the period of the reduction. This letter must include confirmation of the change to the income of the consumer. The letter must also confirm whether the consumer will return to their original salary after the period.

  2. Credit Insurance

    The consumer must advise of any insurance policies that might be claimed against that would cover these circumstances.

  3. UIF

    The debt counsellor must advise the consumer if a claim should be put in at UIF.

  4. Affordable amount

    The consumer must advise the debt counsellor of the installment that they can afford in the period. The debt counsellor will confirm this amount by reviewing the supporting documents and updated budget from the consumer.

  5. New proposal

    The debt counsellor will prepare a new proposal for submission to the creditors taking the above into account. The proposal must include;
    – The time period envisioned
    – The amount the consumer can contribute during the period
    – Any insurance claims or UIF claims that will be applied
    – When the consumer aims to resume full payment
    – How the consumer plans to repay the short-payments after resumption

The creditors will then have 10 days to respond to the new proposal. It must be re-iterated that the acceptance of a new proposal is at the discretion of the creditors. They may opt to decline the proposal, after which they will be entitled to terminate the debt review should payment be interrupted.

Important Note

Consumers must bear in mind that credit reports will more than likely view payment history since entering the debt review as one of the mitigating factors. For this reason, it is VITAL for consumers under debt review to maintain regular payments when they can.

The consumer must also note that where it comes to longer-term or permanent loss of income, debt counselling may no longer be a suitable solution. Debt counselling is only open to consumers who can afford to maintain the agreed/ordered payments.

Start the Process

If you are under debt counselling with us and are struggling with loss of income now, hit the button below to send us an email to start the process. Make sure that you attach your supporting documents to the email.

In closing

This process is meant as a stop-gap solution for when a consumer suffers an unexpected change in circumstance. It must not be abused to deal with any and all speed-bumps on the road. Debt Review is meant as a process to help a consumer settle their debt. Taking too many “holidays” will just lead to the process being placed in jeopardy or prolonged unnecessarily!

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