Overwhelmed by debt? There is help

2012-08-18 15:44

Many consumers are not aware of the role the National Debt Mediation Association plays in providing free advice to consumers facing financial difficulty. However, before you call, make sure you are prepared to make the necessary changes in order to get help, writes Maya Fisher-French 

The National Debt Mediation Association (NDMA) was created as a non-profit centre, where consumers can lodge complaints about credit providers and issues with the debt counselling process.

However, Magauta Mphahlele, CEO of the NDMA, says they were receiving many calls from consumers who did not necessarily require debt counselling, but who were facing temporary financial difficulty or were in serious arrears with some but not all their credit agreements and therefore debt counselling (debt review) was not appropriate.

Many of these cases related to unsecured loans, where the consumer was able to come to an agreement with the credit provider but needed assistance to do so.

To meet this demand, the NDMA established a Financial Hardship work stream, which began operating from March 5 2012. The NDMA Financial Hardship team assists consumers with information and guidance on how to change

their current debt stressed situation, and provides legal and voluntary options available to them. They also assist in negotiating with credit providers on behalf of financially distressed consumers.

In the first three months, the Financial Hardship team handled 430 cases. Mphahlele says, however, that despite all the assistance that the NDMA provides, including how to draw up an income and expenditure sheet and organising conference calls with credit providers, consumers do not always follow through.

“Some consumers prefer to continue to take on debt instead of rehabilitating themselves,” says Mphahlele.

Rehabilitation requires a good hard look at your lifestyle.

Mphahlele says this requires admission on your part, changing spending habits, understanding how much is owed, and putting a plan in place to reduce debt and develop the discipline to live within one’s means, save and use debt responsibly. This is a very difficult path for many consumers to take and the numbers speak for themselves.

Of the 430 applications that were sent to financially distressed consumers, only 216 consumers returned the applications. Of those, 119 reached voluntary agreements with the credit providers to restructure the debt with the help of the NDMA, while 35 were referred to debt counselling.

At least 63 people were unable to reach an agreement and 13 people withdrew from the process.

“Despite the fact that we have financial officers who call the applicants to remind them, some never come back. Sometimes our officers have to call more than 10 times to get a response. In many cases, when we ask why they are not continuing, they say they have found another solution, like finding another way to borrow,” says Mphahlele, adding that for many people it is psychologically difficult to actually face their problems.

“They have to ask ‘how much am I spending, how much debt do I have?’ Then they have to discuss it with their family members and make changes about how they spend their money. It is a complex and involved process, and someone has to be ready to do it,” says Mphahlele.

She says that in some cases consumers become angry with the financial officers and question why they have to provide so much information.

“People think there is a simple solution, but a credit provider has to have evidence to prove the person cannot afford to repay”.

Mphahlele says that when she sees a couple working together who are serious about sorting the problem out, she knows that there will be a solution.

“We want to see someone with dedication.”

There is no magic wand to get rid of debt. It took time to accumulate debt and it will take time to get rid of it. Before a person can be helped, they have to take responsibility for their actions.

How it works:
Thoko Nchabeleng, head of consumer education at the NDMA, explains the process.

» A consumer will contact the NDMA on its hotline and ask for the Financial Hardship team.

» They will be sent a two-page document to outline who they are, what they earn and the nature of the problem.

» The consumer needs to send the completed form back as soon as possible so that the NDMA can establish the next pay date and endeavour to have a new arrangement in place by then.

» The NDMA works on a 20-day turnaround from receiving the completed form. It will organise a conference call with the consumer and the credit providers, and discuss what the consumer can afford to repay and whether this is acceptable to the credit provider.

The aim is to have an agreement in place by the end of the call.

» If agreement is met seven days before payday, it will be implemented by the time the consumer receives their salary.

» The settlement is agreed to telephonically and is binding. Both the consumer and credit provider are given a reference number.

The consumer has to stick to the agreement and meet their obligations as this is a once-off offer by the credit provider. If the consumer fails to make the agreed payments, the settlement falls away.

The NDMA also conducts free workshops for groups of 22 people on debt management and education.

Contact details
Hotline: 0861 116 362
Website: www.ndma.org.za

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