Is it legal to hike debt instalments?

A Fin24 user wants to know if increasing debt instalments annually is legal. She writes:

I have been under debt review since 2008 to date. My December 2012 payment increased from R2 054 per month to R2 156p/m.

On querying the increase, I was told that there is an increase every year; however, I was not aware of that.

My concern is that after about four-and-a-half years, surely there should be a reduction in premiums - my debt is still far from over.

This process has helped a lot. However, never again -  I would rather make an arrangement with the creditors.

Friedl Kreuser of Summit Financial Partners responds:

That seems in order. It is fairly standard for the total debt counselling payment to increase by 5% every 12 months.

The reason is, as the reader notes, there is still much debt left to pay off, and premiums need to be increased to help the consumer settle their debt as fast as possible and counteract the interest being charged while they pay low instalments.

The annual increases would likely have been included in the payment proposal which the consumer (hopefully) signed off, but they should have been pointed out to her.

Hopefully the consumer is also receiving annual salary increases, which will support the increased debt counselling payments.

If she isn't, and she is struggling to keep up her payments, she should inform her debt counsellor of this.

She should keep in mind, however, that not increasing her debt counselling payments means she will take longer to settle her debt and ultimately remain under debt counselling for longer.

 - Fin24

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