Debt counselling shields client from R1.2m blow
September 8, 2008
By MediaOnLine
Cape Town - Statistics SA data show that 109 259 summons for debt were issued and 57 306 civil judgements for debt amounting to half a billion rand were passed in in June, but at least one man avoided being drowned by his debts.
Andre Snyman, managing director of Consumer Assist, one of South Africa's largest debt counselling organisations, said the man "was over-indebted and owed R3 004 985, including his bond. He was paying off R24 400 a month but the interest over the 240 months of the debt was going to amount to R2 783 466 alone. In other words over 20 years, he would pay out R5 788 451.
"The debt counsellor restructured his debt after negotiations with creditors. His monthly payment has dropped to R16 890 a month, which means total interest will come down to R1 544 233 and the debt will be reduced to R2 862 133 - including the debt counselling fees.
"Simply put, debt counselling means he will remove 92 months off his repayments, eliminate R142 852 debt, reduce monthly payments by R7 600 and the biggest saving will come in the R1 239 243 cut from interest rates - enough to buy a really nice second property. And after this process he will have a clean credit record."
The most recent figures released by Stats SA show a year-on-year increase between of 7.8 percent in civil summonses served for debt recorded in June. The data show banks and financial institutions are fiercely pursuing those who owe them money with civil judgements. Their claims total R208.4 million, or 36.1 percent, of all judgements, while retailers are less aggressive with only R61.6 million, or 11.3 percent.
Under the new National Credit Act, debt counselling has provided a viable solution to consumers who in the past were given easy credit and then pursued aggressively by the same easy lenders when they could not service their obligations.
Consumer Assist stresses that the fees charged by debt counsellors - who are often professionals in the financial industry - are low and added to the debt so the consumer does not face additional costs once their debt has been liquidated.
Snyman said Consumer assist is experiencing “increasingly high traffic” to its call centre and website.
"When the National Credit Act came into effect we initially had an average of around 10 applications a day for debt counselling. That rose to about 60 a day in June and now we are receiving an average of 190 applications a day.
"We are also receiving increasing numbers of requests from companies to ensure that their staff know how to manage money better to avoid fraud, high absenteeism and low productivity."
Snyman noted some 'classic signs' of staff members who are in financial trouble that should serve as a warning to business owners:
Consistently asking for advances on their salary;
Absenteeism toward the end of the month because they cannot afford bus or taxi fare or petrol;
Accident prone, or prone to making mistakes because they are preoccupied with debt worries;
Persistently ill with stress-related symptoms.
Snyman advised businesses to be sensitive to employees showing signs of debt stress and to ensure they receive financial help, including debt counselling.
"Working in this industry is very disturbing because we realise that not everyone in serious debt has overspent, rapid rises in interest rates have outpaced salary increases and if a breadwinner becomes seriously ill or dies it can throw the family into financial crisis," he said.
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