10 years Presentation focus Based on my experience over the past - PowerPoint PPT Presentation

10 years

Presentation focus  Based on my experience over the past (almost) 10 years of debt counselling  Challenges  Successes  Wisdom acquired  Not about pointing fingers  Hopefully highlight the progress made, lessons learned and areas for improvement.

In the beginning…  “Locking in” of consumers prior to NCA  Debt counselling born on 1 June 2007  Low numbers of DC‟s vs high demand for debt review  Lack of consumer education – applying post summons/judgement  Lack of responses to forms 17.1 and proposals  High volumes of terminations  No court process

Debt Counselling - version 1  Tighten up living expenses  Subtract living expenses from income  Draft restructure proposals with whatever amount is left  4 schools of thought:  Pro rata based on instalment  Pro rata based on capital amount  Bias in favour of unsecured debt  Bias in favour of secured debt  Interest rate reductions – zero… prime… 15.5…

Debt Counselling - version 1  Credit providers to cover PDA fees  Credit providers not to cover PDA fees  Proposal software excluded PDA fees, credit fees and insurance premiums  Fees not disclosed on COB‟s - introduced post acceptance/court order

Debt Counselling - version 1  Court  No court process  Continuous postponements  Jurisdiction issues – DC‟s  Forum shopping – CP‟s  Repossessions  DC‟s and CP‟s making it up as we went along

Debt Counselling - version 2  Post declaratory order  Differentiation between 86(7)(b) and 86(7)(c) proposals  Terminations, removal from roll, opposition  Continuous change to the court process  postponements  Moratorium on terminations  the formula

Debt Counselling - version 2  Proposals – interest rate reductions  Adjusted to suit each credit provider ○ e.g. Edcon, Direct Axis, Standard Bank  Continuous credit provider skirmishes ○ ( always the credit provider‟s fault) ○ Court matter opposed – instalment too high ○ Court matter opposed – consent order application  Reason for opposition: “the fact that the credit provider is opposing the application renders it invalid”

Debt Counselling - version 3  Interest rate concessions  Understanding this is not a feature of debt review  Positive change in attitude towards debt review from credit providers  Court backlogs slowly starting to clear  Learning from court decisions  Understanding our role to be that of an unbiased 3 rd party  Learning that the courts looked at debt review from a completely different perspective.

Debt Counselling - version 4  Task Team/CIF  Voluntary process agreement  DCRS  DCRS  did we sell out?  Terminations & withdrawals  DC cannot terminate the process but can a DC reject an application other than per 86(7)(a)?  Consumer withdrawals post form 17.2 prior to court order  NCT  86(7)(b) vs 86(7)(c)  Consumer withdrawals

Successes  Debt Counsellors  Less confrontational  Improved cooperation and support amongst each other  Improved relationships with CP‟s  Credit Providers  Improved cooperation with DC‟s  CP‟s going the extra mile to find solutions  More supportive of the industry ○ DCRS  vastly improved case resolution  greater benefits for consumers  The Debt Review Awards

Successes  NCT  More „in tune‟ with debt review  Awesome turn-around times  Huge effort made to clear backlogs  Allows for an up-to-date DC book  Consumers  Improved knowledge of debt review  Applying sooner for help  Reduced levels of indebtedness (NCA success)

Successes  NCR/CIF  A working solution to DHS  Improved complaint management  Solutions to industry problems  Cracking down on unscrupulous industry players  DC Associations  Controversial at times  Credit must be given for the huge positive impact these associations have had on the industry  Looking out for the DC  Both of these entities should be credited with the successes listed under DC‟s and CP‟s

Challenges  The Paradoxical role ○ Neutral, 3 rd party ○ Not the agent nor advocate for the consumer ○ Receives payment from the consumer ○ Is the applicant in court matters with credit providers as respondents ○ Has to resort to soliciting new consumers ○ Is required to reject an application if consumer is not considered over-indebted ○ Does not earn any fees from rejected applications ○ The right behaviours been driven?

Challenges  Knowledge  DC training inadequate  Marketing  DC‟s should not need to solicit business ○ Creates a psychological conflict of interest  Greater focus needed on consumer education ○ General ○ Credit provider and credit bureau intervention levels

Challenges  The need for dispute resolution body ○ CP cooperation is often dependent on current policy – policies change.  Compliance with the law should not be policy dependent ○ Disputes between DC‟s & CP‟s arising from differing interpretations of the NCA ○ DC‟s cannot fight court battles against CP‟s ○ Magistrate courts do not set precedent ○ CP‟s have the financial advantage ○ Some examples…

Challenges  Disputed interpretations of the NCA ○ Section 78(2) ~ c/a’s excluded from reckless credit  A CP claims this section excludes developmental credit from reckless lending assessments. Does that imply that CP is not complying with sections 80 to 82? ○ Section 81(4) ~ the complete defense  If a CP establishes that a consumer failed to fully and truthfully answer any requests for information  AND a court or Tribunal determines this materially affected the CP‟s ability to make a proper assessment

Challenges  Disputed interpretations of the NCA ○ Section 86(10) ~ notice of termination  A CP may give notice to terminate the review … [Section 130(1)(a )] … and may approach a court for an order to enforce a c/a if at least 10 days have elapsed since the 86(10) notice was delivered.  CP‟s are correctly applying 86(10) but then elect not to proceed with legal enforcement (as is their choice)  However, if they do not enforce, they cannot prevent the DC from referring the matter to court (they may oppose) or prevent the consumer from re-applying for debt review in the future.  Non referral being used to block a section 86(11) applications

Challenges  Disputed interpretations of the NCA ○ Section 88(3) ~ default on order or agreement  A CP may not exercise or enforce by litigation or other judicial process any right or security under that c/a until  The consumer is in default under the credit agreement  And the consumer either defaults on a restructure agreement or defaults on a restructure order ○ Does this section permit a CP to exit debt review without obtaining a judgement? ○ Does this section not clarify that a default under a credit agreement still exists even after a restructure order has been granted? ○ Does a debt restructuring order nullify a pre- existing default?

Challenges  Other problem areas ○ Debit order cancellations ○ Credit Bureaux – clearance certificates ○ Section 108  statements ○ Section 103(5)  in Duplum  (African Bank has got it right) ○ Section 86(5)  act in good faith and respond to reasonable requests ○ Section 130(4)(e)  CP‟s referring matters to court where the c/a is subject to a restructure order and the consumer has complied with the order

Debt Counselling v5.0?  A short term, high impact focus on operational issues  A declaratory order to put to rest long- standing NCA disputes – all of them.  Consumer awareness and education campaign  Development of referral processes from CB‟s & CP‟s to consumers  Regulated DC call centre operations  Establishment of DC co-operatives

And finally…  Respect the role  DC‟s have played a phenomenal role in the development of the industry  Retire the phrase “debt counselling was never intended to be…”  DC‟s have shown an amazing resilience over the past 10 years  As an industry we have a lot to be proud of, having taken a “poorly written” NCA and still managed to deliver what debt counselling was intended to do – help consumers.