A Fin24 user who decided to go for debt counselling was surprised by the fees he ended up having to pay. He writes:
I have taken a first step by accepting that I have debts and also to consult a debt counsellor.
We made an arrangement that I must pay the debt counsellor R3 800 every month into his account to be distributed.
What confuses me is that I have to pay the same amount for the first month as a negotiation fee. Also, after two months I'll pay the same amount for the legal fees.
I believe if debt counsellors have our interest at heart they should start paying our debts immediately and take a certain percentage monthly. Why should we pay negotiation fees and legal fees?
It appears I'll be paying them a total R12 000 to assist me. Do you think this is normal for someone in debt to pay this huge amount?
Independent debt counsellor Renée Marais NCRDC1780 responds:
The debt review fees are set out in the Government Gazette. Here is a link to it if you want to have a look.
Generally, the first month is earmarked for the debt counsellor and may not exceed R6 000. The second month is for the legal fees and is usually around R3 350.
Debt counsellors are required by the National Credit Regulator (NCR) to disclose fees upfront, and consumers need to sign this disclosure. If your debt counsellor did not do this, please inform the NCR on form 29 to be obtained from their website. Here is a link to the site.
The fee structure is also set out there for your information.
A negotiation fee is for the work the debt counsellor does, including the statutory forms that need to be served on creditors, the actual calculations of the redistribution of funds, the negotiation with creditors and the preparation of the debt review file for the legal team.
The legal fees are towards the preparation of the affidavits, the notion of motion, the actual court application, the serving of documents, the court appearance and the court order.
These fees are actually low if you look at the amount of work that needs to be done on your behalf. Fees may only be deducted in the first two months: debt restructuring in the first month and legal fees in the second month.
From the third month distribution towards your creditors must begin.
Also, please check if your debt counsellor is registered with the NCR. Ask for a copy of the NCR registration certificate of the person attending to you at the debt collection firm.
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