Debt Counselling after the Task Team DEBT COUNSELLING The Debt - PowerPoint PPT Presentation

Debt Counselling after the Task Team

DEBT COUNSELLING  The Debt Counselling process was 4 years old in June 2011  We started with an Act but no process or systems  In November 2007 the Workstream Group agreed a process  There were many implementation challenges Court process which changed as a result of the Declarator  Different processes, forms and systems by all role players  Lack of cooperation from Credit Providers  Introduction of PDA’s  Different interpretations of the NCA (ongoing)  Abuse of the Debt Review process by clients   2010 Negotiation of voluntary enhancements by NCR Task Team

PARTNERSHIP Debt Counsellor Credit Consumer Provider PDA

DC PROCESS - HIGH LEVEL Step 6: Step 1: Repayment Plan Application After Care Step 5: Step 2: Credit Provider Affordability Acceptance and Assessment Court Order Step 3: Step 4: Restructure Notification

 Task Team Report finalised and accepted by NCR in 2010  Code of Conduct finalised and accepted by NCR  Task Team replaced with Debt Review Advisory Committee  Restructure Rules approved by Credit Industry  Central Web Based Rule Engine ready February 2011  DC systems interface with Rule Engine ready February 2011  Process has been enhanced to address main bottlenecks and reduce the number of cases stuck in Debt Review  Credit Ombud

6 DRAC DC’S CP’S PDA’S NDMA DCASA PDASA • Code of Conduct for each (CP’S, DC’S, PDA’S) • Adoption of relevant process enhancements, rules and guidelines • Institutional Support Capacity • National Debt Review Ombud Scheme 6/20/2014

DRAC  NCR appointed independent Chair (David Lewis):  CP’s: 6 representatives  DC’s: 3 representatives  PDA’s: 1 representative  Ex officio non voting NCR, SARB and DTI representation invited Replaced NCR TT on permanent basis   Mandate inter alia to:  Monitor and advise NCR on an ongoing basis on the Debt Review process and its impact  Negotiate ongoing process enhancements and additional debt restructuring rule sets for deployment after approval by NCR  Accredit DC systems against agreed standards  Monitor, oversee and report on implementation of agreed codes , guidelines and rules; a  Govern centralised rules engine (DCRS) for debt restructuring proposal validation

CODE OF CONDUCT  NCR requested that all CP’s, DC’s and PDA’s to accept Code of Conduct (which includes the Task Team Agreement)  NCR to supply decals to all parties who has accepted the Code of Conduct and indicate acceptance on the NCR web site  By signing Code of Conduct all parties agreed to:  The Task Team Process  The Affordability Assessment Guideline  The Restructure Rules  The System Guidelines for DC Systems  The Dispute Resolution Process

STAKEHOLDER OBLIGATIONS Debt Counsellors  Should not encourage consumers to enter Debt Review with promises of payment holidays or similar inducements  Should provide applicants with a information brochure  Should not take on consumers who have no money available for repayment or no reasonable prospect of finding money to commence debt repayment  Should ensure that all the steps in terms of NCA and enhancements are followed  Should take care that full and correct particulars of consumer are obtained  Should continue to assist the consumer during Debt Review process  Should proceed to obtain Court Order and monitor monthly repayments

STAKEHOLDER OBLIGATIONS Credit Providers (Included in Section 48 Code of conduct)  Should improve administration and co-operation to speed up process  Implement formal policies on compliance with the Act as well as any process and/or restructuring rules adopted under S48 to combat over-indebtness  Implement effective policies and procedures on cancelling existing debit orders and stop orders duly authorised by consumers  Not terminate Debt Review if consumer is maintaining payments as per proposal and no other material breach of Credit Agreement (Insurance)  Formalise mandate with external Law Firms to ensure only material opposition  Formulate formal policies on trade-off between competing product houses

STAKEHOLDER OBLIGATIONS Payment Distribution agencies (PDA’s)  Should validate account details to which payments are made  Should capture all information provided by DC’s correctly  Should ensure that all parties are informed of payments made  Should submit monthly statements to consumers  Must ensure that payments are made expeditiously

TASK TEAM AGREEMENT Affordability Process Restructure Assessment + + Rules Guideline for and Forms DC’s Code of Conduct and Compliance

PROCESS ENHANCEMENTS  Process redefined to achieve consensual resolution where possible  DC’s required to submit proposals with assessment  CP’s must consider and respond (agree if eligible and rules solve the case)  Central rules engine to validate proposals submitted by DC’s  Contested Court applications becomes a last resort  Standard Forms  Certificate of Balance (COB)  Over-indebtedness assessment summary (for 17.2 stage)  Cancellation of Debit Orders & Salary Stop Orders  Debt restructuring proposal (provisional and final)  PDA payment plan (provisional and final)  Credit Provider responses (provisional acceptance, final acceptance, rework and decline letter)

14 1. Subscribe to the Statutory DC process in terms of NCA 2. Subscribe to the Voluntary DC process as agreed by Task Team 1. The Task Team agreement did not change or amend the NCA 2. Voluntary enhancements agreed to improve: • Affordability Assessment conducted by Debt Counsellors • Process • Standard forms • Consensual resolution and approval of repayment proposals • Conduct by Credit Providers, Debt Counsellors and PDA’s 3. Compliance process 6/20/2014

VOLUNTARY ENHANCEMENTS Statutory NCA process 1 2 3 4 5 6 7 8 9 Statutory NCA process plus voluntary enhancements 1 2 3 4 5 6 7 8 9 10 11 Process enhancements to be implemented by all role players

THE PROCESS IN PRACTICE 1. Enquiry S86(10) Notice 6. Final Proposal 2. Application S86(11) Y Application 7. CP Accept. 3. Notification Update System N 4. Determination Terminated & First Proposal N 8. Set down 10. After Care 5. CP Accepts or Declines. Update COB 9. S 87 Hearing 11. Clearance

DEBT RESTRUCTURING RULES 17 1 2 3 4 Affordability Reduction of Extension of Reduction of Repayment Amount NCA fees Period Rates Plan DC System Central System for Validations DC System DEBT RESTRUCTURING HIGHLIGHTS Stage 1: Exclude Stage 2: Include No Luxury Fair Cascading Fixed Rate Cascading Assessment Items and Escalation and Escalation 6/20/2014

CP CONCESSIONS 18 Transactional & non- finance charges 1 Waived & interest penalties on pre NCA Agreements Monthly Service fee as per NCA 2 Waived Secured Loans (Home and Vehicle) Floor limit of Repo + 2 % 3 Unsecured Loans Floor Limit Zero % 4 6/20/2014

TERM EXTENTIONS 19 Mortgages 240 m (max 360m) P. 1.5 times – 84 M Vehicles C. 1.25 times – 84 M Credit facilities & incidental Debt without terms above R 3600 60 Months Credit facilities & incidental Debt without terms R 1500 - R 3600 36 Months Credit facilities & incidental Debt without terms up to R 1500 18 Months Unsecured Credit Agreements with defined term above R 3600 60 Months Unsecured Credit Agreements with defined term R 1500 - R 3600 36 Months Unsecured Credit Agreements with defined term up to R 1500 18 Months 6/20/2014

REFERRAL TO COURT S87 Full Consent One or more no Consent Consent Order Application Application • Consent per Credit Agreement where applicable • Extension of term and reduced payment where All Credit Providers agreed no consent (no adjustment in interest rate) to repayment plan • Section 103(5) applied where applicable This can include fee and • Reckless Credit – where applicable rate reduction as per concession 20 6/20/2014

DEBT COUNSELLING Day 1 to 60 Day 60 to Rehabilitation  Application  Briefing attorney  Credit Bureau report  Repayment control  Monthly budget  Credit Provider harassment  Debit order management  Court Appearance  Notifying Credit Providers  Progress updates  Reckless Credit  Credit Provider queries  Notifying Credit Bureau  Financial Counselling  Repayment Proposal  Annual review  Update Repayment Plan  Termination Notices - Credit Providers  Court Application  Financial Emergencies  Serving Court Application  Implementing Court order  Obtaining Court date  Obtain proof of repayment • Protecting Consumers  In Duplum (Section 103(5))  Clearance Certificate Rights  Update Credit Bureau

THANK YOU Questions are welcome