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

Debt Counsellor Credit Provider PDA

Consumer

PARTNERSHIP

DC PROCESS - HIGH LEVEL

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

 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

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DRAC CP’S DC’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

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 Assessment Guideline for DC’s

Process and Forms

Restructure Rules

+ +

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)

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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

VOLUNTARY ENHANCEMENTS

1 2 3 4 5 6 7 8 9

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2 3 4 5 6 7 8 9 10 11 Statutory NCA process Statutory NCA process plus voluntary enhancements

Process enhancements to be implemented by all role players

THE PROCESS IN PRACTICE

• 1. Enquiry
• 3. Notification
• 4. Determination

& First Proposal

• 5. CP Accepts or

Declines. Update COB

• 6. Final Proposal
• 11. Clearance
• 8. Set down
• 10. After Care

N

Terminated

S86(10) Notice

N

• 2. Application
• 9. S 87 Hearing
• 7. CP Accept.

Update System

S86(11) Application

Y

DEBT RESTRUCTURING RULES

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Affordability Amount Reduction of NCA fees Extension of Period Reduction of Rates Repayment Plan

1 2 3

DEBT RESTRUCTURING HIGHLIGHTS

Fixed Rate Stage 1: Exclude Cascading and Escalation Stage 2: Include Cascading and Escalation Fair Assessment

No Luxury Items

Central System for Validations

4

DC System DC System

CP CONCESSIONS

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Transactional & non- finance charges & interest penalties on pre NCA Agreements Waived Monthly Service fee as per NCA Waived Secured Loans (Home and Vehicle) Floor limit of Repo + 2 % Unsecured Loans Floor Limit Zero %

1 2 3 4

TERM EXTENTIONS

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Mortgages Vehicles Credit facilities & incidental Debt without terms above R 3600 Credit facilities & incidental Debt without terms R 1500 - R 3600 Credit facilities & incidental Debt without terms up to R 1500 Unsecured Credit Agreements with defined term above R 3600 Unsecured Credit Agreements with defined term R 1500 - R 3600 Unsecured Credit Agreements with defined term up to R 1500 240 m (max 360m)

• P. 1.5 times – 84 M
• C. 1.25 times – 84 M

60 Months 36 Months 18 Months 60 Months 36 Months 18 Months

REFERRAL TO COURT S87

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Full Consent

Consent Order Application All Credit Providers agreed to repayment plan This can include fee and rate reduction as per concession

One or more no Consent

Application

• Consent per Credit Agreement where applicable
• Extension of term and reduced payment where

no consent (no adjustment in interest rate)

• Section 103(5) applied where applicable
• Reckless Credit – where applicable

DEBT COUNSELLING

Day 1 to 60 Day 60 to Rehabilitation

• Application
• Credit Bureau report
• Monthly budget
• Debit order management
• Notifying Credit Providers
• Reckless Credit
• Notifying Credit Bureau
• Repayment Proposal
• Update Repayment Plan
• Court Application
• Serving Court Application
• Obtaining Court date
• Protecting Consumers

Rights

• Briefing attorney
• Repayment control
• Credit Provider harassment
• Court Appearance
• Progress updates
• Credit Provider queries
• Financial Counselling
• Annual review
• Termination Notices - Credit Providers
• Financial Emergencies
• Implementing Court order
• Obtain proof of repayment
• In Duplum (Section 103(5))
• Clearance Certificate
• Update Credit Bureau

Questions are welcome

THANK YOU