Added protection for consumers under NCA Act

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Expected to be implemented by the National Credit Regulator later this month, the most important among the amendments is the fact that creditors have to perform an affordability assessment to verify that the lender can afford the loan or credit that they are applying for. If it can be proven that a creditor extended credit recklessly, the loan may be declared null and void.

The very important section 129 notice that was sent to consumers to inform them that legal steps are about to be instituted against them will now provide consumers with a ten day period during which they can apply for debt review with a debt counsellor. During this period no further legal action can be taken against the consumer.

The Termination of Debt Review clause effectively means that once an application for debt review has been set down in court by the debt counsellor, he or she is fully protected under the act.

Negotiate repayment

Once an indebted consumer has signed up with a debt counsellor to go under debt review, the creditor may not take legal action against the consumer for a period of sixty days. During this period the debt counsellor will attempt to negotiate repayment terms that are affordable by the indebted consumer.

While the matter is pending in court, no legal steps may be taken until the matter has been heard in court. This can take a year or longer during which period the consumer is given a breather to settle his or her outstanding debt.

Neil Roets, CEO of Debt Rescue, said the new act will afford consumers substantially greater protection than was the case in the past. "We are particularly pleased the act has taken a strong position on the collection of prescribed debt making it illegal to try and collect it or to sell it to a third party collection agency as was the case in the past."

Questionable methods

"These agencies often used questionable methods to collect these old debts including harassing consumers at their workplace to cause maximum embarrassment. We are also delighted that the new act provides consumers with full legal protection during the time that a debt review application has been lodged with the court until the date that a judgement has been given."

Roets said the new legislation placed a greater emphasis on the important role that debt counsellors played in the process of debt review.

While debt counselling did not reduce the responsibility of the consumer to pay outstanding debts, it did provide them with breathing space because it stretched out the repayment cycle over a longer period and protected their assets during the period that they are under debt review.