1 June 2007, the National Credit Act 34
of 2005 came into effect, and debt counselling
was introduced for the first time in South
• It gives consumers the opportunity
to pay back their creditors and not lose
their possessions, vehicles or homes.
• It is a legal process, prescribed by the
National Credit Act, which allows you to
pay back your debt, according to affordability.
• The National Credit Regulator
(NCR) regulates the credit
industry in South Africa.
• Debt counsellors are trained and registered
by the National Credit Regulator. Consumers
apply for debt counselling with a NCR registered
debt counsellor, who will negotiate the
process between the consumer and their creditors,
to restructure your monthly payments, to
an amount you will be able to afford.
• All credit agreements
can be included, to be restructured by the
• There is no monitory limit
to the amount of debt you can include.
• The debt counsellor will make a new offer
to all creditors, where monthly
repayments are reduced, extension
of contractual terms proposed, and in some
cases also to reduce interest
rates and fees/costs.
• Once accepted, you will no
longer be in arrears with your
accounts, and will build up a good new credit
• The total process is prescribed,
from how the consumer must apply, up to
the finalisation of the process, where the
debt counsellor will issue the consumer
with a clearance certificate,
after paying off all debt.
• After negotiating with the creditors,
the debt counsellor refers all matters to
a Magistrate’s court,
for a decision where an agreement was not
reached with all creditors, and a consent
order will be granted. The consent order
ratifies the new agreements
between the consumer and the creditors and
both the consumer and the creditors must
abide by this order.
• When under debt counselling, the consumer
will pay one, consolidated amount
every month, to a NCR registered Payment
Distribution Agency (PDA),
to distribute the money to the different
creditors, until all accounts are paid off.
• The debt counsellor will also investigate
cases where a creditor might have granted
The onus is placed on the creditor to do
a decent assessment of the client’s financial
situation, as prescribed by the act, to
make sure that the client can afford the
credit, before granting another credit agreement.
If not, the credit agreement can be annulled
and written off by a court.
• A creditor must at all times provide a
consumer with a pre-agreement, valid for
5 days, before the credit agreement comes
into effect. Maximum interest, fees and
costs are also prescribed and a creditor
is not allowed to charge more, which will
result in reckless credit.
• A debt counsellor will also investigate
if any accounts have prescribed,
where no payments were made for a period
of at least three years.
• After issuing a clearance certificate,
the credit bureaus must remove all negative
information from the consumer’s credit record,
within 5 working days, and the client will
be able to apply for credit again, but this
time according to what he/she can afford.