Debt Counselling after

the Task Team

DEBT COUNSELLING

The Debt Counselling process was 4 years old in June 2011

We started with an Act but no process or systems

In November 2007 the Workstream Group agreed a process

There were many implementation challenges

Court process which changed as a result of the Declarator

Different processes, forms and systems by all role players

Lack of cooperation from Credit Providers

Introduction of PDA’s

Different interpretations of the NCA (ongoing)

Abuse of the Debt Review process by clients

2010 Negotiation of voluntary enhancements by NCR Task Team

Debt Counsellor

Credit Provider

PDA

Consumer

PARTNERSHIP

DC PROCESS - HIGH LEVEL

Step 1:

Application

Step 2:

Affordability Assessment

Step 3:

Notification

Step 4:

Restructure

Step 5:

Credit Provider Acceptance and

Court Order

Step 6:

Repayment Plan

After Care

Task Team Report finalised and accepted by NCR in 2010

Code of Conduct finalised and accepted by NCR

Task Team replaced with Debt Review Advisory Committee

Restructure Rules approved by Credit Industry

Central Web Based Rule Engine ready February 2011

DC systems interface with Rule Engine ready February 2011

Process has been enhanced to address main bottlenecks and reduce the

number of cases stuck in Debt Review

Credit Ombud

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6

DRAC

CP’S DC’S PDA’S

NDMA DCASA PDASA

• Code of Conduct for each (CP’S, DC’S, PDA’S)

• Adoption of relevant process enhancements, rules and guidelines

• Institutional Support Capacity

• National Debt Review Ombud Scheme

DRAC

NCR appointed independent Chair (David Lewis):

CP’s: 6 representatives

DC’s: 3 representatives

PDA’s: 1 representative

Ex officio non voting NCR, SARB and DTI representation invited

Replaced NCR TT on permanent basis

Mandate inter alia to:

Monitor and advise NCR on an ongoing basis on the Debt Review process and its impact

Negotiate ongoing process enhancements and additional debt restructuring rule sets for deployment after approval by NCR

Accredit DC systems against agreed standards

Monitor, oversee and report on implementation of agreed codes, guidelines and rules; a

Govern centralised rules engine (DCRS) for debt restructuring proposal validation

CODE OF CONDUCT

NCR requested that all CP’s, DC’s and PDA’s to accept Code of Conduct

(which includes the Task Team Agreement)

NCR to supply decals to all parties who has accepted the Code of

Conduct and indicate acceptance on the NCR web site

By signing Code of Conduct all parties agreed to:

The Task Team Process

The Affordability Assessment Guideline

The Restructure Rules

The System Guidelines for DC Systems

The Dispute Resolution Process

STAKEHOLDER OBLIGATIONS

Debt Counsellors

Should not encourage consumers to enter Debt Review with promises of

payment holidays or similar inducements

Should provide applicants with a information brochure

Should not take on consumers who have no money available for repayment or

no reasonable prospect of finding money to commence debt repayment

Should ensure that all the steps in terms of NCA and enhancements are followed

Should take care that full and correct particulars of consumer are obtained

Should continue to assist the consumer during Debt Review process

Should proceed to obtain Court Order and monitor monthly repayments

STAKEHOLDER OBLIGATIONS

Credit Providers (Included in Section 48 Code of conduct)

Should improve administration and co-operation to speed up process

Implement formal policies on compliance with the Act as well as any process and/or

restructuring rules adopted under S48 to combat over-indebtness

Implement effective policies and procedures on cancelling existing debit orders and

stop orders duly authorised by consumers

Not terminate Debt Review if consumer is maintaining payments as per proposal

and no other material breach of Credit Agreement (Insurance)

Formalise mandate with external Law Firms to ensure only material opposition

Formulate formal policies on trade-off between competing product houses

STAKEHOLDER OBLIGATIONS

Payment Distribution agencies (PDA’s)

Should validate account details to which payments are made

Should capture all information provided by DC’s correctly

Should ensure that all parties are informed of payments made

Should submit monthly statements to consumers

Must ensure that payments are made expeditiously

TASK TEAM AGREEMENT

Affordability Assessment

Guideline for DC’s

Process and Forms

Restructure Rules + +

Code of Conduct and Compliance

PROCESS ENHANCEMENTS

Process redefined to achieve consensual resolution where possible

DC’s required to submit proposals with assessment

CP’s must consider and respond (agree if eligible and rules solve the case)

Central rules engine to validate proposals submitted by DC’s

Contested Court applications becomes a last resort

Standard Forms

Certificate of Balance (COB)

Over-indebtedness assessment summary (for 17.2 stage)

Cancellation of Debit Orders & Salary Stop Orders

Debt restructuring proposal (provisional and final)

PDA payment plan (provisional and final)

Credit Provider responses (provisional acceptance, final acceptance, rework and decline letter)

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14

1. Subscribe to the Statutory DC process in terms of NCA

2. Subscribe to the Voluntary DC process as agreed by Task Team

1. The Task Team agreement did not change or amend the NCA

2. Voluntary enhancements agreed to improve:

• Affordability Assessment conducted by Debt Counsellors

• Process

• Standard forms

• Consensual resolution and approval of repayment proposals

• Conduct by Credit Providers, Debt Counsellors and PDA’s

3. Compliance process

VOLUNTARY ENHANCEMENTS

1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9 10 11

Statutory NCA process

Statutory NCA process plus voluntary enhancements

Process enhancements to be implemented by all role players

THE PROCESS IN PRACTICE

1. Enquiry

3. Notification

4. Determination & First Proposal

5. CP Accepts or Declines. Update COB

6. Final Proposal

11. Clearance

8. Set down

10. After Care

N

Terminated

S86(10) Notice

N

2. Application

9. S 87 Hearing

7. CP Accept.

Update System

S86(11)

ApplicationY

DEBT RESTRUCTURING RULES

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17

Affordability Amount

Reduction of NCA fees

Extension of Period

Reduction of Rates

Repayment Plan

1 2 3

DEBT RESTRUCTURING HIGHLIGHTS

Fixed Rate

Stage 1: Exclude

Cascading

and Escalation

Stage 2: Include

Cascading

and Escalation

Fair

Assessment

No Luxury

Items

Central System for Validations

4

DC System DC System

CP CONCESSIONS

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18

Transactional & non- finance charges

& interest penalties on pre NCA AgreementsWaived

Monthly Service fee as per NCA Waived

Secured Loans (Home and Vehicle) Floor limit of Repo + 2 %

Unsecured Loans Floor Limit Zero %

1

2

3

4

TERM EXTENTIONS

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Mortgages

Vehicles

Credit facilities & incidental Debt without terms above R 3600

Credit facilities & incidental Debt without terms R 1500 - R 3600

Credit facilities & incidental Debt without terms up to R 1500

Unsecured Credit Agreements with defined term above R 3600

Unsecured Credit Agreements with defined term R 1500 - R 3600

Unsecured Credit Agreements with defined term up to R 1500

240 m (max 360m)

P. 1.5 times – 84 M

C. 1.25 times – 84 M

60 Months

36 Months

18 Months

60 Months

36 Months

18 Months

REFERRAL TO COURT S87

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Full Consent

Consent Order Application

All Credit Providers agreed to repayment plan

This can include fee and rate reduction as per

concession

One or more no Consent

Application

• Consent per Credit Agreement where applicable

• Extension of term and reduced payment where

no consent (no adjustment in interest rate)

• Section 103(5) applied where applicable

• Reckless Credit – where applicable

DEBT COUNSELLING

Day 1 to 60 Day 60 to Rehabilitation

Application Credit Bureau report Monthly budget Debit order management Notifying Credit Providers Reckless Credit Notifying Credit Bureau Repayment Proposal Update Repayment Plan Court Application Serving Court Application Obtaining Court date • Protecting Consumers

Rights

Briefing attorney Repayment control Credit Provider harassment Court Appearance Progress updates Credit Provider queries Financial Counselling Annual review Termination Notices - Credit Providers Financial Emergencies Implementing Court order Obtain proof of repayment In Duplum (Section 103(5)) Clearance Certificate Update Credit Bureau

Questions are welcome

THANK YOU