It is important to know that debt counseling is not a free service; however the fees attached are minimal and will save the consumer from the loss of assets and possible bankruptcy or sequestration. The fees associated with debt counseling are the result of an agreement between the NCR and various debt counseling bodies. It lays out a fixed guideline that ultimately serves to protect the consumer, and consumers earning less that R2500 per month are entitled a subsidy from the NCR.
The fees pertaining to debt counselling start with an application fee of R50 for the debt review process to begin.
If the application is rejected, consumers must pay a R300 rejection fee in terms of section 86(7)(a) of the National Credit Act. Thereafter the debt counsellor will ask for a restructuring fee that cannot exceed R3000, and it will usually be a lesser amount than the first instalment stipulated in the plan.
If a debt counsellor does not submit the proposal the relevant credit providers and courts within 60 working days, the applicant will be entitled to a full refund of the fees already paid to the debt counsellor. Once the application is successful, and after-care fee of 5% (not exceeding R300) will be charged for 24 months, and thereafter reduced to 3% until the debt has been settled.
If the applicant decided to withdraw once negotiation have been done, the debt counsellor is entitled to 75% of the restructuring free. All legal fees will be disclosed at the onset, and will be recovered from the consumer with written permission.
All fees must be discussed before commencement of the process, and can be negotiated.
Article written by: Andrea van Tonder 02-2013