Escaping the debt trap

Oscar and Russel Dickerson, the debt councilor. Picture: Tebogo Letsie
Oscar and Russel Dickerson, the debt councilor. Picture: Tebogo Letsie
Maya Fisher-French spent an afternoon with debt counsellor Russell Dickerson and his client Oscar to understand how people fall into the debt trap, the tactics used by credit providers to keep their customers addicted to debt and how debt review can work, if done properly 

Four months ago, City Press reader Oscar wrote to us asking for help in finding a debt counsellor as, in his words, he was “broke because of debt”.

After doing some research, we found RD Debt Counselling and Oscar met with debt counsellor Russell Dickerson. After four months of debt review, Oscar is so relieved and happy about the changes in his life that he offered to share his story with our readers.

Oscar’s debt story started in 2009 when, as a new graduate starting in the police force, he went to visit a friend who had been in training with him.

“He had this big TV, a fridge and all these nice things. I couldn’t understand how he had all this when he had just finished college like me. He told me about his African Bank credit card and that I should get one.”

With a newly issued credit card, Oscar had access to R15 000 of credit from virtually his first pay cheque. As he spent, so the credit limit kept increasing.

Then he started to open more accounts and access more credit lines, which included store cards, and loans from Capitec and Old Mutual. Eventually the debt repayments were consuming most of his salary.

“About two years ago it got so bad that I could not even pay for my child’s school fees. It was all going to pay the debt. At the end of the month I had just R600 left after paying the debt. It was so painful and I had to ask myself: Where are you going?”

In an attempt to get rid of his debts, he sold his Toyota Tazz. “People were gossiping about me, calling me a Johnny Walker,” says Oscar. (Johnny Walker is slang for someone who has to walk because they don’t have wheels). Eventually Oscar gave in and, after two years, returned to African Bank for a R100 000 personal loan to buy a car. At the same time, African Bank offered him a debt consolidation loan which included the money for the car and settled his various debts.

He now had a personal loan of R134 000 at 27% per annum, costing him R3 720 per month as well as credit card debt of R17 500.

By the time Oscar met with Russell, he was paying R7 224 per month in short-term debt repayments, which included a Game store card of R5 300 and a Capfin loan of R5 000 at the maximum allowable interest rate of 36% per annum. The Capfin loan had started off as R2 000 payable over three months. This was just meant to get him through a tough period, but the minute he made his first instalment, Capfin increased the loan facility by another R1 000 and then again, once Oscar made his next payment, they increased the facility by another R2 000.

“This is a very typical scenario of short-term loans,” says Russell, who explains that, as soon as you make an instalment, they offer you an increased credit limit.

What you are not aware of is that this constitutes a new loan, and therefore new initiation fees are charged. Someone who is taking out a loan at 36% per annum is already clutching at straws to make ends meet, and the offering of even more credit is difficult to resist.

“What I don’t understand is why African Bank allowed me to take out another loan I could not afford,” says Oscar, who admitted, however, that he had not listed all his expenses when he applied for the loan.

“If you do not put down all your expenses, then the credit provider can argue that you lied on your application, and we cannot apply for reckless lending,” says Russell, adding that the sales people at the credit providers do not ask too many questions or check whether the expenses are realistic, they just get you to sign as quickly as possible.

“Unfortunately, government employees are often extended debt because it is easier to garnishee their salaries.”

Jars filled with destroyed credit cards at Russel Dickerson the debt councilor’s office


Once Russell met with Oscar, he drew up a basic budget which included groceries, school fees, rent and other necessities.

It was clear that Oscar did not have sufficient funds after paying these basic needs to meet his debt repayments, which made him a candidate for debt review.

A central system, DCRS (debt counselling rules system), has been developed through negotiations between the credit providers and the debt counsellors whereby a revised payment plan can be created and, if it falls within a specific range, is automatically approved by the credit providers and the application goes to court uncontested. Part of this agreement includes a reduction in the interest paid, which reduces the total amount that Oscar will pay his creditors.

For example, the interest rate on his African Bank loan was reduced to 1.33%, which meant the repayments fell from R3 720 to R2 574. His credit card was put on to term payments and will be paid off in 49 months at an interest rate of 1.11%. The interest of his CapFin loan was reduced to 1.54%.

In total Oscar is paying R3 724 less each month on his debt and will be debt free in just over four years, while still paying his child’s school fees and meeting all his basic needs.

“I have started to breathe again. At the end of the month I am the happiest person,” Oscar told City Press, but admits that not having access to credit is difficult.

“A piece of land became available in my area and I wanted to buy it. I called Russell but he told me I couldn’t borrow any money. I was disappointed at first but then I realised I would just be in debt again. I can wait until I can be in control.”

Russell says not everyone manages with debt review: “Some people are just not ready, you need to make sure you are ready for the commitment.”

Russell says that there is usually a fall-off in clients in the first three months, but most clients who make it to the third month finish the process.

“When I meet with clients after four months I hardly recognise them. When we first met they were depressed, feeling useless. This is especially true for Afrikaans men who believe it is their role to provide.

“Four months later they are bubbly and happy, they have taken control of their lives,” says Russell. He adds that most people end debt review sooner than the 60 months allowed, as once they take control of their debts, the rest of their finances improve.

“The average period of debt review for our industry is 42 months,” says Russell.

Fast Facts — A word of warning about debt counsellors

Oscar is fortunate that he is working with an ethical debt counselling firm. City Press has received many complaints about unethical behaviour by fly-by-night operators who force people into debt review without their consent. 

In one example, a reader wrote that a debt counsellor came to see her and asked her to sign a document to give permission to check her credit rating to see if she qualified for debt review. The next month they were making deductions from her bank account as they had put her under debt review without her knowledge. Russell says that this behaviour is not uncommon and there are also cases of telephonic discussions where the company claims you have agreed to debt counselling – but it is never able to produce the tape recording. 

“If you agree to anything, they take that as consent. Never give your bank details unless you are consenting to the process,” warns Russell. In order to protect yourself, only work with debt counsellors who are members of the Debt Counsellors Association of South Africa (Dcasa) as you then have a body to complain to. 

If you are a victim of unethical behaviour, you can complain to Dcasa ( or the National Credit Regulator (


Beware of restructured debt agreements: Some credit providers use the restructuring of debt to keep clients permanently indebted.

“I have seen many cases where the client asks the credit provider to lower the monthly instalment so that they can survive. The credit provider reduces the repayment amount to the extent that it does not fully cover the interest and fees so the client gets deeper into debt and the loan amount increases.”

If you enter an agreement with your credit provider, make sure you are at least paying the interest and fees and ask them for confirmation of how long it will take to pay off the loan.

Don’t ignore summonses: If you go to court to defend the legal action, it is likely that the magistrate/judge will be lenient on you.

“Clients seldom go to court to defend the application, so when they do arrive the magistrate or judge is so happy that they tend to be very lenient. They often force the credit provider into a reasonable settlement,” says Russell.

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