CREDIT SECTOR: Voluntary Interventions Yielding Positive Results
Recent Western Cape Business News
The newly released 2011 annual results of the National Debt Mediation Association (NDMA) show that voluntary interventions by the credit industry are beginning to have a positive impact on efforts to assist over-indebted consumers. It also shows that an increasing number of debt-stressed consumers are benefitting from free voluntary debt mediation offered by the NDMA.
Requests for mediation, which were either a formal complaint against a credit provider in terms of the credit industry’s new Code of Conduct to Combat Over-indebtedness, or requests for assistance to negotiate the restructuring of debt obligations, increased by 120% from 538 in 2010 to 1 877 in 2011.
The NDMA’s mandate in terms of the Code is to receive, manage and resolve complaints against credit providers; facilitate voluntary debt rearrangements; promote compliance by credit providers; implement consumer education and awareness programmes; and provide a platform for the debt counselling and credit industry to engage and find common solutions.
“Through its debt mediation service the NDMA made it possible for hundreds of consumers, individually or through their debt counsellors, to engage with credit providers and find win-win solutions to alleviate the consumer’s debt stress while allowing credit providers to receive reasonable payment,” says NDMA CEO, Magauta Mphahlele.
She added that through the NDMA’s interventions, consumers were able to retain their assets, such as primary residences and means of transport, through mediated debt restructuring agreements.
Of the 1 877 matters dealt with in 2011 by the NDMA, 95% were finalised. Of the finalised matters 77% (1 345) were in favour of the consumer, while 33% (444) were not.
“’In favour’ does not mean the credit provider was in the wrong in all instances, but it does reflect the willingness of credit providers to make a concession if the merits of the case permit,” says Mphahlele. “For example, with regards to car repossessions and property auctions, the credit provider in most instances had a valid court order to execute, but through mediation, 126 property auctions were stopped, 207 car repossessions were halted and 426 terminated matters were reinstated back into debt review.”
Reinstatement into debt review is an important remedy for the consumer as they then continue to enjoy protection from legal action while making reasonable and approved payments to the credit provider.
The results also show that 26% of the complaints received by the NDMA related to terminations from debt review, followed by car repossessions (17%), then summons issued whilst consumer is under debt review (11%) and property auctions (8%). A number of consumers and debt counsellors approached the NDMA to assist in preventing repossession or other enforcement action even if no particular complaint was raised against the conduct of the credit provider.
“The fact that the NDMA offers a quick and free service is a welcome relief for many consumers who otherwise could have spent huge amounts of money to cover legal costs if they had to engage with credit providers in court,” says Mphahlele.
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