Debt counselling a mixed bag

2010-01-13 09:14

DEBT counselling is not always the best long-term solution for

consumers in financial difficulty, WesBank has said.

The vehicle financing group urges consumers to make sure they are

fully aware of the advantages and disadvantages of debt counselling.

A Wesbank statement says: “The debt counselling process is a

serious matter and although it allows consumers, if they qualify, to repay their

debt at reduced monthly instalments, it will take them much longer to pay off

all their original debt.”

During the debt counselling process consumers are also prevented

from accessing any further credit.

General manager marketing at WesBank George Nyabadza says:

“Consumers must, regardless of their financial institution, always approach

their bank first should they be in any financial difficulty, or foresee any

difficulty in the future, before seeking alternative solutions.”

“Over-committed consumers are especially vulnerable this time of

the year and can easily fall prey to misleading advertising messages.” WesBank

receives complaints on a daily basis of consumers who have suffered a loss due

to negligence and mismanagement of their affairs by debt counsellors.

“Another general complaint is where debt counsellors, after

receiving their fees, do not always complete the debt review process, because

their fees are paid up front and the consumer’s problem is therefore not

resolved,” says Nyabadza.

He says a common mistake that consumers under debt review often

make is to entrust their debt counsellor with the duty of distributing their

funds amongst their various creditors, instead of insisting that a payment

distribution agent be appointed for the purpose.

“This has too often resulted in consumers losing money.”

Where a consumer’s only solution is to approach a debt counsellor,

they need to ensure the person is registered with the National Credit

Regulator.

“In addition, registration as a member of the National Debt

Mediation Association would be recommended, as the counsellor will be equipped

to assist them with budget advice, support and mediation with financial

institutions and other credit providers.”

WesBank advises customers under debt review to keep up their

monthly insurance premiums.

“In the event of a total right-off of a vehicle due to theft or an

accident, the customer remains liable for the full outstanding debt.”

 

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