Debt counsellor fined R250 000 for misleading consumers during debt review

A debt counsellor has been fined R250 000 by the National Consumer Tribunal after placing a consumer under debt review without proper disclosure or written consent.

The move prevented the consumer from accessing new credit. Debt review is intended for those who are over-indebted, restructuring debt and protecting them from legal action. However, it also flags a credit profile and blocks new credit until a court clears the review status.

Some debt counsellors use marketing – often cold calls – to sign consumers up for debt review without explaining its implications, says MJ Davis, chief executive officer of retail loans at FNB.

“This case is a stark reminder of how easily consumers can be misled into a process that fundamentally alters their financial freedom,” Davis said. “Debt review is a serious legal commitment. When entered without full understanding or consent, it can have devastating consequences, especially for vulnerable consumers who are already under financial pressure.”

Debt review may be the right choice for some, but debt consolidation can be a less severe alternative, combining multiple debts into one personal loan with lower interest rates, no legal restrictions on future credit and no credit bureau flag.

Debt review company DCGsa paints a sobering picture of debt in South Africa through a collation of numbers on its website: R2.56 trillion in loan balances, R208 billion in overdue payments, and 17.97 million accounts in arrears.

DebtBusters' latest annual Money-Stress Tracker, now in its fourth iteration, found that 70% of respondents have felt money stress this year, which, although an eight-percentage-point decrease since 2023, is still a worrying picture. 

The results of the survey, conducted in May and June among 27,000 respondents not currently in debt review, found that nine out of ten who experience money stress say it affects their home life. Almost three-quarters report a negative impact on their work life and health.

“Consumers need to be empowered with knowledge,” Davis said. “Following the National Credit Regulator’s (NCR) guidance is essential. It’s the difference between regaining control of your finances and being locked into a process you never agreed to.”

Before agreeing to any debt-related service, Davis advises:

• Ask for everything in writing – request a written explanation and don’t sign until you understand it.
• Watch out for vague promises – if it’s debt review, they must say so upfront.
• Check their credentials – work only with counsellors registered with the NCR (www.ncr.org.za).
• Know your rights – you must give explicit, written consent before being placed under debt review. Misleading conduct should be reported to complaints@ncr.org.za.

“Debt review can be a helpful tool, but only when alternatives like debt consolidation are no longer feasible and when it’s used correctly and with your full understanding,” Davis said.

Yet, Ayesha Hatea, director of research and consulting at TransUnion, said on its website that “South Africans are increasingly turning to low-value personal loans with shorter repayment terms to manage their monthly expenses.

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