Debt Review, Done Properly - A Road Back to Financial Health

Debt review carries a stigma in South Africa. For creditors and collections teams, a debt review flag on a client's file is often read as a warning sign, an account that is stuck and unlikely to move. For consumers, the process is sometimes entered into in a hurry, poorly explained, or joined without a clear picture of how it ends.

Neither reaction gives the process a fair hearing. Debt review, formally called debt counselling, was built into the National Credit Act to give over-indebted consumers a legal, structured way to repay what they owe without losing their home or their car to legal action.

Handled correctly, from the first meeting with a debt counsellor to the final clearance certificate, it works.

What debt review actually does

A registered debt counsellor assesses whether a consumer is genuinely over-indebted, then negotiates with each creditor to restructure the debt into a single, affordable monthly instalment. A magistrate's court order, or a consent order agreed with creditors, then protects the consumer for the duration of the plan: no further legal action and no repossession, provided payments continue.

This is not the same as a consolidation loan. No new credit is taken on. The consumer's existing obligations are simply repaid on more realistic terms, through a payment distribution agent, under the court's supervision. Consumers under debt review also cannot take on further credit while the plan is active, which is precisely the point - the process is meant to stop the debt spiral.

Where it goes right…and wrong

Handled correctly, debt review rests on a few basics that are simple to state but not always easy to enforce in practice.

The consumer needs to understand exactly what they are signing, and to have chosen the process themselves rather than been talked into it. The National Credit Regulator has repeatedly warned about debt counsellors who cold-call consumers, sometimes misrepresenting themselves as government or NCR officials, and get people to sign up over the phone before they understand the consequences. Consumers should approach an NCR-registered debt counsellor themselves, read any document before signing it, and be wary of anyone pushing them to commit during the first call.

The repayment plan itself also needs to be realistic. A budget that cannot survive real life collapses, and a collapsed plan does not help anyone: not the consumer, not the creditor, and not the debt counsellor's own standing with the regulator.

The cases that damage debt review's reputation are the ones where it was handled badly from the start: consumers signed up without understanding it, plans that were never realistic to begin with, counsellors who did not follow through on their statutory duties at the finish line. None of that is a reason to distrust the mechanism itself. It is a reason to insist that it is used properly, by properly registered counsellors, with consumers who understand what they are agreeing to and what happens once they complete it.

The exit: what a proper debt review clearance looks like

This is the part that matters most: how does someone actually get their name off debt review once everything has been repaid?

Section 71 of the National Credit Act sets the conditions out clearly. A consumer qualifies for a clearance certificate once their unsecured debt is settled in full, any mortgage or other long-term agreement is up to date, and the debt counselling fees themselves have been paid. Once those conditions are met, the debt counsellor is required to issue the clearance certificate within seven days, and to file a certified copy with the National Credit Register and every credit bureau within seven days of that.

If a debt counsellor drags their feet or cannot be reached, the consumer is not stuck waiting. They can file the certificate themselves, or lodge a complaint directly with the National Credit Regulator to have it enforced.

Once the credit bureaus receive the certificate, they are obliged to remove the debt review flag and expunge the default listings tied specifically to the restructured agreements. This is not a courtesy extended at the bureau's discretion. Matters heard by the National Consumer Tribunal have reinforced that this expungement is a right once the statutory conditions are met.

What clearance does not mean

A clearance certificate removes the debt review marker and the review-related listings. It does not however, on its own, rebuild a credit score overnight. That still takes time: paying accounts on time, every time and keeping debt within a sensible margin, month after month, not just in the weeks after clearance. A cleared consumer is not automatically a low-risk consumer again. They are, however, someone who has just spent months or years proving they can stick to a plan and commit to repaying their debt, which is not a small thing to demonstrate.

A client who entered debt review with a registered counsellor, stuck to a realistic plan, and exited with a proper Section 71 clearance certificate has done exactly what the National Credit Act asked of them. They are not evading their debt obligations. They are the system working as intended, and once that clearance comes through, they deserve to be treated, and reported on, accordingly.

Ends…

References: The National Credit Act (Section 71)

Ian Wood is the CEO of Alefbet Collections & Recoveries. The group includes collections firms Shapiro Shaik Defries and Associates , ITC Business Administrators, and Metropolitan Revenue Collections, and works with both creditors and consumers to reach practical, workable repayment solutions.