New move to limit excessive fees for consumers

The guidelines cover consumers earning more than R2500 (individual gross income). Consumers earning below R2500 will be subsidised by the National Credit Regulator (NCR). The guidelines are an interim measure aimed at setting maximum fees that debt counsellors may charge in order to limit exploitation of over-indebted consumers, pending the finalisation of the fee regulations by the Department of Trade and Industry.

Peter Setou, Senior Manager: Education and Strategy at the NCR, says the organisation has reviewed the guidelines and welcome initiatives by the industry to curb the charging of excessive fees by debt counsellors. Setou says debt counsellors are encouraged to use these as a guideline and charge less where appropriate.

Setou also reminded debt counsellors that as per the conditions of registration it is a requirement for such fees to be disclosed upfront to consumers before they can be accepted for debt counselling.

He warned the industry: "The NCR will not hesitate to take action in instances where consumer abuse in relation to fees is detected. In taking such action we will take these industry guidelines into consideration."

In terms of the guidelines, a debt counsellor may receive the following amounts in respect of consumers with an individual gross income of more than
R2 500.00 per month or household income of more than R3 500.00 per month:

1.1 An application fee, recoverable directly from the consumer upon receiving an application for debt review, limited to R50 as prescribed by the Act

1.2. A rejection fee of R300.00 in respect of consumers whose applications have been rejected in terms of section 86(7) (a);

1.3. A restructuring fee of the lesser of the first instalment of the debt re-arrangement plan or R3000.00 (excluding Vat), in respect of a consumer whose applications have been accepted in terms of sections 86(7) (b) or 86(7) (c). (Should a joint application be required the fee can be increased to R4000.00 (excluding Vat)).

1.4. Should a Debt Counsellor fail to summit proposals to Credit Providers or refer the matter to a Tribunal or a Magistrate Court within 60 business days from date of the debt review application the Debt Counsellor has to refund 100% percent of the fee paid by the consumer.

1.5. A monthly after-care fee of 5 percent (excluding Vat) of the monthly instalment of the debt re-arrangement plan up to a maximum of R300 (excluding Vat), for a period of 24 months, thereafter reducing to 3 percent (excluding Vat) of the monthly instalment, to a maximum of R300 (excluding Vat), for the remaining period of the debt re-arrangement plan.

1.6. Should the consumer wish to withdraw from the process after the debt counsellor has completed the restructuring negotiations a fee equal to 75 percent of the restructuring fee as per 1.3 above is payable by the consumer;

1.7. Legal fees, if and when they occur, may be recovered from the consumer provided the amount of such fees are disclosed up-front to the consumer and agreed to in writing by the consumer.

1.8. The fee structure will be reviewed in January 2009.