A brief history of debt review: from its origins to the present day

Debt review has become an important tool for millions of South Africans struggling with debt. However, few people know about the origins and history of this process.

From its early beginnings as debt counselling to its modern-day form as debt review, this industry has undergone significant changes over the years.

Understanding its history can help us appreciate the role of debt review in modern South Africa and how it can be used to achieve financial stability. In this article, we'll take a journey through the history of debt review, exploring its origins, development, and future prospects.

Development of debt counselling in South Africa

In South Africa, the National Credit Act 34 of 2005 was a significant milestone in the history of debt counselling. It introduced a formal debt counselling process aimed at helping over-indebted consumers avoid legal action from creditors.

The Act required all credit providers to register with the National Credit Regulator (NCR) and follow certain guidelines in their debt recovery practices. This provided a legal framework for debt counselling services to operate and allowed consumers to access affordable debt advice.

Introduction of debt review in the National Credit Act

In 2007, the National Credit Amendment Act introduced debt review as a formal debt relief option for over-indebted consumers.

Debt review allowed consumers to have their debts restructured and managed by a debt counsellor. This process provided a legal stay of execution on legal action by creditors and allowed consumers to make affordable monthly payments towards their debts.

Debt review was a significant improvement over earlier debt relief options, such as administration and sequestration, which were often expensive and had a negative impact on credit scores.

Role of the National Credit Regulator

The National Credit Regulator (NCR) played a crucial role in the early years of debt review. The NCR was responsible for accrediting and monitoring debt counsellors, ensuring that they followed the rules and regulations set out in the National Credit Act.

The NCR also maintained a registry of debt counsellors and oversaw the debt review process. Its involvement helped to establish debt review as a legitimate debt relief option and gave consumers confidence in the system.

Growth of the debt counselling industry

Despite the challenges, the debt counselling industry grew rapidly in the early years of debt review. This was due to the high levels of consumer debt in South Africa and the need for affordable debt advice.

Many debt counsellors established successful businesses, and the industry became more competitive over time. As debt review became more widely known and accepted, more consumers sought debt counselling services, and the industry continued to grow.

How the industry has exploded in recent years

The debt review industry has grown significantly since the introduction of debt review in the National Credit Act in 2007. According to the National Credit Regulator (NCR), there were 108 registered debt counselling companies in 2007. By 2020, this number had increased to 627 registered debt counselling companies.

The growth of the debt review industry can be attributed to a number of factors, including increased consumer awareness of debt review as a debt relief option, changes to the National Credit Act that have made it more difficult for consumers to obtain credit, and the economic challenges facing many South Africans.

Despite the growth of the industry, there have been concerns about the quality of service provided by some debt counselling companies. In recent years, the NCR has taken action against a number of debt counselling companies for non-compliance with the National Credit Act and poor service to consumers.

Changes to the National Credit Act

Since the introduction of debt review in the National Credit Act, there have been a number of changes to the legislation. These changes have been aimed at improving the effectiveness of debt review and protecting consumers from abuse.

For example, the National Credit Amendment Act of 2014 introduced the concept of reckless lending, which made it possible for consumers to have their debts written off if they were granted credit they could not afford to repay. The Act also made it easier for consumers to apply for debt review by allowing them to apply directly to a debt counsellor.

Increased demand for debt review services in recent times

In recent years, there has been an increased demand for debt review services in South Africa. This is due to a number of factors, including high levels of household debt, economic uncertainty, and rising unemployment.

Many South Africans have found themselves struggling to keep up with debt repayments, and debt review has become an attractive option for those looking to get their finances back on track.

As a result, the debt counselling industry has continued to grow, with more debt counsellors entering the market to meet the demand for their services.

Debt review clearly has a rich history in South Africa, from the early debt relief efforts to the introduction of debt counselling and debt review in the National Credit Act. Over the years, debt review has helped thousands of South Africans get back on their feet financially.

Importance of debt review in modern South Africa

Today, debt review continues to play an important role in modern South Africa, providing a lifeline to those struggling with debt.

With the recent changes to the National Credit Act and the continued growth of the debt counselling industry, there is no doubt that debt review will remain a key part of the financial landscape in South Africa.

Final thoughts and advice for those considering debt review

If you’re struggling with debt, it is important to seek help as soon as possible.

Debt review can be a valuable tool in helping you get your finances back on track, but it’s important to do your research and work with a reputable debt counsellor. With the right support and guidance, you can overcome your debt challenges and achieve financial freedom.

Tips for choosing a debt counselling agency:

• Look for a registered and reputable agency: Ensure that the agency is registered with the National Credit Regulator (NCR) and has a good reputation.
• Check their fees: Find out how much the agency charges for their services, including the initial consultation fee, monthly debt review fee, and any other charges.
• Ask about their experience: Inquire about how long the agency has been in business and their experience in handling debt review cases.
• Read reviews: Look for online reviews from previous clients to get an idea of their experience with the agency.
• Assess their level of professionalism: Observe their level of professionalism when interacting with them, including how they respond to your questions, the level of detail they provide, and their overall attitude towards their work.