Important Tools For Debt Review

Online, December 16, 2013 (Newswire.com) - Debt Counselling or a good repayment plan largely rely on the concessions of the credit providers under codes of conduct to be effective currently, while the National Credit Act plays catch-up to an industry that is heading past the first milestones. As debt counsellors with Pay Plan Solutions, one often tries to express repayment plans in various ways to firstly show clients what the plan can do for them, or what it will achieve. So it is very important to be able to calculate the effect interest and fees have on an account. To use a practical example, if one uses a typical consolidation loan of R50 000 which is stretched over a 5 year period at the maximum allowed interest rate, it is not unimaginable that you could end up paying back more than R120 000 over the life of the loan.

Credit providers sometimes indicate this as the contract sum, as opposed to the current settlement amount which should not include future interest. So the old common law in duplum rule seems to have found a home in Section 103(5) of the National Credit Act, and the Supreme Court of Appeal has upheld this. It creates an opportunity and a tool for Debt Counsellors that can be used when codes of conduct can't be applied. Especially for high interest accounts and accounts where legal action has commenced, one can often make use of Section 103(5) of the act to get the consumer out of debt.

Section 103(5) of the NCA states that despite any common law or credit agreement to the contrary, any interest which accrues while the debtor is in default may not in aggregate exceed the unpaid balance of the principal debt. The biggest problem with repayment plans that have been negotiated with debt collectors in the past are that in some instances they never seem to end. It is the National Credit Act which has for the first time in the industry attempted to regulate penalties and protect consumers from paying off fees and interest for the rest of their lives. What is clearly evident is that if a debt counsellor does need to make use of Section 103(5) at any point to bring one of their client's accounts to conclusion, it will often have less of a negative impact than consolidating one's debt might have. For free assessments or a second opinion one can contact their National Helpline on 0861 626859 or their offices directly on the Cape Town number, 021 554 0708
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