Debt review without consent? Here is what you need to know

LET'S be honest. When money’s tight and the bills keep piling up, it’s easy to feel like you’re drowning. You’re juggling groceries, school fees, transport, and maybe even helping extended family.

Then, out of nowhere, someone calls offering to “save you money” or “reduce your interest rates.” It sounds like a lifeline. But what if that lifeline quietly pulls you into something you never agreed to, like debt review?

That’s exactly what happened in a recent case brought before the National Consumer Tribunal (NCT). A consumer was placed under debt review without being properly informed or giving written consent. As a result, he couldn’t access credit, and the debt counsellor was fined R250,000 for misconduct.

Here’s the problem. Debt review is meant for people who are truly over-indebted. It restructures debt and protects you from legal action, but it also flags your credit profile and blocks you from taking on new credit until you’re cleared by a court of law.

The issue is that some debt counsellors aren’t correctly informing prospective clients as to what they will be getting into, if they opt for debt review. They use smooth marketing (with cold calls their favoured channel), often along with vague promises to get people into debt review without explaining the consequences.

“This case is a stark reminder of how easily consumers can be misled into a process that fundamentally alters their financial freedom,” says MJ Davis, Chief Executive Officer of Retail Loans at FNB.

“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.”

Desperation can lead to risky decisions. When you’re stressed about money, it’s tempting to grab the first solution that promises relief. But not all solutions are equal. Debt review might be the right choice for some.

But for many, a less severe alternative is debt consolidation. Debt consolidation lets you combine multiple debts into one personal loan, giving you one monthly payment, lower interest rates, zero legal restrictions on future credit, and (most importantly) no credit bureau flagging.

“Consumers need to be empowered with knowledge,” adds Davis. “And 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.” 

Davis says this is what you should do before you agree to anything:

• Ask for everything in writing - If someone offers you a financial service, make sure you understand what it is. Ask for a written explanation and don’t sign anything until you’re clear.
• Watch out for vague promises - “Save money” and “reduce interest” sound great but ask “how?”. If it’s debt review, they need to tell you upfront.

• Check their credentials - Only work with debt counsellors registered with the National Credit Regulator (NCR). You can verify them at www.ncr.org.za

• Know your rights - You must give explicit, written consent before being placed under debt review. If you think you’ve been misled, report it to complaints@ncr.org.za

“Debt review can be a helpful tool, but only when alternative options like debt consolidation are no longer feasible and when it’s used correctly and with your full understanding. If you’re feeling overwhelmed, take a breath, call your bank, ask questions, and explore all your options. Because when it comes to your financial future, you deserve to be in control,” concludes Davis.

SUNDAY TRIBUNE