The National Debt Mediation Association (NDMA) was created as a non-profit centre where consumers can lodge complaints about credit providers as well as issues with the debt counseling process.

However, Magauta Mphahlele, CEO of the NDMA, says they were receiving many calls from consumers who did not necessarily require debt counseling but who were facing temporary financial difficulty or were in serious arrears with some but not all their credit agreements and therefore debt counseling (debt review) was not appropriate.

Many of these cases related to unsecured loans where the consumer was able to come to an agreement with the credit provider but needed assistance to do so.

To meet this demand, the NDMA established a Financial Hardship work stream, which began operating from the 5 March 2012. The NDMA Financial Hardship team assists consumers with information and guidance on how to change their current debt stressed situation and provides legal and voluntary options available to them. They also assist in negotiating with credit providers on behalf of financially distressed consumers.

In the first three months the Financial Hardship team had handled 430 cases of financial hardship. Mphahlele says however that despite all the assistance that the NDMA provides, including how to draw up an income and expenditure sheet and organizing conference calls with credit providers, consumers do not always follow through.

“Some consumers prefer to continue to take on further debt instead of rehabilitating themselves,” says Mphahlele. Rehabilitation requires a good hard look at your lifestyle. Mphahlele says this requires first admission, changing spending habits, understanding how much is owed and putting a plan in place to reduce debt and develop the discipline to live within one’s means, save and use debt responsibly. This is a very difficult path for many consumers to take and the numbers speak for themselves:

Of the 430 applications that were sent to financially distressed consumers, only 216 consumers returned the applications. Of those 119 reached voluntary agreements with the credit providers to restructure the debt with the help of the NDMA while 35 were referred to debt counseling. Sixty-three people were unable to reach an agreement and 13 people withdrew from the process.

“Despite the fact that we have financial officers who call the applicants to remind them, some never come back. Sometimes our officers have to call more than ten times to get a response. In many cases when we ask why they are not continuing they say they have found another solution like finding another way to borrow,” says Mphahlele who says for many people it is psychologically difficult to actually face their problems.

“They have to ask ‘how much am I spending, how much debt do I have?’ Then they have to discuss it with their family members and to make changes about how they spend their money. It is a complex and involved process and someone has to be ready to do it,” says Mphahlele who adds that in some cases consumers become angry with the financial officers and question why they have to provide so much information. “People think there is a simple solution but a credit provider has to have evidence to prove the person cannot afford to repay”.

Mphahlele says that when she sees a couple working together and who are serious about sorting the problem out she knows that they will be a solution. “We want to see someone with dedication; this is not an easy way out”.

There is no magic wand to getting rid of debt; it took time to accumulate and takes time to get rid of it – before a person can be helped they have to take responsibility for their actions.

How it works:

Thoko Nchabeleng, head of consumer education at the NDMA explains the process:

• A consumer will contact the NDMA on their hotline 0861 11 6362 and ask for the Financial Hardship team
• They will be sent a two page document to outline who they are, what they earn and to describe the problem
• The consumer needs to send the completed form back as soon as possible so that the NDMA can establish the next pay date and endeavor to have a new arrangement in place by then
• The NDMA works on a 20 day turnaround from receiving the completed form. They will organize a conference call with the consumer and the credit providers and discuss what the consumer can afford to repay and whether this is acceptable to the credit provider. The aim is to have a an agreement in place by the end of the call.
• If agreement is met seven days before pay day, it will be implemented by the time the consumer receives their salary
• The settlement is agreed telephonically and is binding and both the consumer and credit provider are given a reference number. The consumer has to stick to the agreement and meet their obligations as this is a once-off offer by the credit provider. If the consumer fails to make the agreed payments the settlement falls away.

The NDMA also conducts free workshops for groups of 22 people on debt management and education

Contact details:

Contact centre: 0861 11 6362
Website: www.ndma.org.za

Complaints

The NDMA also handles complaints about debt review either due to a debt counselor not providing the service or a credit provider who has terminated the agreement. Magauta Mphahlele says they often receive complaints where a debt counselor has disappeared or has not submitted the correct papers to the credit provider in terms of the debt review process. The consumer believes that they are under debt review and have been making payments yet discover the credit provider has terminated the agreement. The NDMA then works with all parties involved and requests the National Credit Regulator to recommend a new debt counselor who then finalizes the proposal. “It is important that you keep informed as to what is happening to your debt review process and do not just hand it over to a debt counselor and forget about it,” says Mphahlele.

This article first appeared in City Press