The National Credit Act was implemented in 2007, and debt review was part of that act.

During its infancy the debt review system was, to say the least, chaotic. There was no consensus in the industry on rules around the restructuring of debt and. Various criteria were used to implement the rules resulting in disparate debt review proposals that did not treat all credit providers nor all credit consumers fairly. Proposals were made that would never enable the debt to be paid off and there was a huge amount of uncertainty in the industry.

In 2009 a task team was set up and new rules were negotiated between interested parties in the industry. These included Credit Providers Association, Debt Counsellors Association of South Africa and the Association of Payment Distribution Agencies. This task team met and in August 2010 agreed rules that would govern the debt review process.

The rules that were adopted related to codes of conduct to be complied with by credit providers and debt counsellors as well as rules regulating the format of proposals that would be binding on credit providers.

The DCRS was launched in 2011 and the end goal is that only DRAC accredited rules will be used on the DCRS for validation purposes.

The rules are complicated but in essence the task team proposed that in the case of mortgage bonds the term of the loan could be extended to as much as 360 months; In the case of vehicle assets the term could be extended to 1.5 times the original contract terms for private vehicles subject to 84 months maximum; and the term for repayment of unsecured debt could be extended to as long as 60 months in certain instances.

The next step in the process is to reduce monthly service fees and increase the term so that all fees are ultimately waved and reduced to zero.

The third step is to reduce the interest rate. In the case of mortgage finance and vehicle asset finance, the interest rate can be reduced to the repo rate plus 2%. In the case of unsecured loans, the interest rate can, in the appropriate cases be reduced to zero.

The application of these rules has meant that in some instances, we have been able to reduce clients interest liability by tens of thousands of rands, and in a few instances, hundreds of thousands of rands. In this way The Debt Solution can offer very real debt relief to its clients.

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