Debt counsellors reckon the National Credit Act (NCA) ought to be amended to allow the restructuring of debts such as municipal rates, levies, school fees, and money owed to doctors and attorneys.
Should this be allowed, it would be a win-win for burdened consumers, said the National Debt Counsellors’ Association (NDCA). Currently, municipal rates, levies, school fees, and money owed to medical practices and attorneys and other similar debts fall outside the NCA. This means that debt counsellors cannot renegotiate these debts.
According to Benay Sager, chairperson of the NDCA, summonses issued for debt relating to services, which comprise mainly municipal rates, increased by around 25% in November 2022 both for businesses and individuals, compared to the same month in 2019. There have also been increase of 33% for court judgments against consumers who fell behind on school and tuition fees for the same period.
“It’s likely that some creditors are realising that getting a summons isn’t the most effective way of recovering what’s owed and financially stretched consumers are prioritising debtors who shout the loudest. Typically, these are businesses rather than schools and municipalities, which is why a lot more people are behind on repaying this kind of debt,” explained Sager.
He said it was fair to assume that if summonses had increased by 25% over the past three years that the value of what’s owed had grown by the same proportion.
He said debt counselling was a tried, tested and effective tool for consumers dealing with high debt levels and evidence of this was in the high number of people who successfully completed debt counselling and got their clearance certificates. This had increased five-fold over the past six years, he said.
“We also know from experience that when different debts are consolidated into a single monthly repayment, as they are in debt counselling, consumers have a higher repayment ratio because they don’t pick and choose which debt to repay.”
"The NDCA’s view is that including, particularly rates and school fees when amendments to the NCA are considered, would be a win-win, both for consumers struggling with high debt burdens and debtors currently excluded such as schools and municipalities.
“Expanding the NCA to allow debt counsellors to renegotiate municipal rates and similar kinds of debt would be a more effective way for municipalities and others to recover the billions they’re currently owed,” said Sager.
In February, Sowetan Consumer reported that there was a 53% jump in debt-counselling inquiries in the last three months of 2022 compared to the previous year.
Online inquiries shot up by 130%. The number of those who actually took up their services also saw a spike, in December, while the lending activities between financial institutions and consumers significantly increased with the average loan size going up by 31%.
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