Debt counsellors’ shoddy advertising scheme of “saving” over-indebted consumers by up to 60% of their monthly bill repayments has become a seven-month headache for a Gauteng man who was placed under debt review allegedly against his will.
Sydney Mkhabela, 60, a father of four from Tembisa, has been battling to have his name removed from debt review since July when he learned that Debtline, a debt counselling firm, had placed him under review despite him changing his mind about signing up.
By law, consumers cannot apply for, or be granted any new credit while they undergo debt counselling until they pay off their debt and get a clearance certificate from their counsellors.
Mkhabela said he was browsing on the internet on July 1 when he stumbled on a Debtline advert which poked at his curiosity. “I had some debt and I was managing it. I wasn’t desperate. What lured me were the testimonies from their clients who said the company had helped them make half monthly repayments to their creditors,” Mkhabela told Sowetan Consumer.
He then contacted the company and was, on the same day, asked for his ID number and full names. He said he was told these details would be used to pull up his credit bureau data for assessment.
“They called three days later and requested my ID copy, proof of address, bank statement and my living expenses list and also gave me an application form, which I signed. During the assessment stage they discovered that I’m a divorcee and they asked me to give them the divorce decree in order to finalise the process. I refused and they told me they can’t go ahead with the application without it,” said Mkhabela.
He said on July 23 he got a notice from his bank that his credit card has been suspended because he had been put under debt review. “On the same day, I called Debtline pleading with them to remove my name because I had not agreed to debt counseling. They kept sending me from pillar to post,” said Mkhabela.
Under normal circumstances, a counsellor would use Payment Distribution Agencies (PDAs) to debit their client’s bank account the agreed monthly repayment, which is then paid directly to the creditors. However, Mkhabela said the company has never debited his bank and that he’s been paying his creditors himself.
In August, his debt counsellor issued Mkhabela with Form 17 informing him that he was suspending his services. He reported the matter to the National Credit Regulator (NCR) in November and he was advised to go to court for reprieve.
“The NCR requested proof of the debt review application and we received a signed Form 16. Thereafter, Mr Mkhabela was advised on how he may lawfully exit debt review, and this includes the process of approaching the magistrate’s court to have the debt review application rejected. If, however, Mr Mkhabela wishes to have our recommendation/outcome reconsidered, he may approach our office and request that we issue a notice of non-referral which he may use to approach the National Consumer Tribunal to have such outcome reconsidered,” said NCR spokesperson Didi Sebothoma.
However, Mkhabela said he could not afford to hire a lawyer.
Sebothoma added that the Form 17 Mkhabela received and the fact that his bank account was not being debited did not automatically nullify his debt review process. “My life has stopped all together. I do everything out of pocket now,” said Mkhabela.
Dean Randall, chief operations officer from Debtline, said: "With regard to the matter you have raised, we cannot discuss the specific details of the client’s case (which we have reviewed), but will explain the situation and what is needed for resolution. These are important issues for consumers to understand and were explained to the consumer you have referred to us."
He said Mkhabela's problem can only be sorted via courts or when he pays off his debt.
"He can either pay off all his unsecured debt such as credit card, loans and store accounts and his counsellor will then grant him Form 19 (clearance certificate) and then inform credit bureaus. This process can take up to a month," said Randall.
He said the court action to have the review rejected can take between three to six months.
"While debt review is a brilliant product to help people who are struggling financially, both of these options to exit debt review can take time, so people should not enter debt review lightly," said Randall.
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