Debt intervention is essentially a debt review offered by the National Credit Regulator. It applies only to certain consumers based on how much they earn and the type of debt they have.
The idea is to get consumers to change the way they currently spend their money at home and free up as much as possible to pay towards their debt each month. It seems that the goal will be to try to restructure consumers debts over 60 months where possible.
Many people see it as a low-cost alternative to administration orders and sequestration.
WHO CAN APPLY FOR DEBT INTERVENTION?
The Banking Association of South Africa (BASA) told parliament that about 9.5 million people might qualify for the process but it is important to know that not everyone can qualify for debt intervention.
To be eligible consumers must:
- Have less than R50 000 debt
- Have only unsecured debt (like loans and credit cards; not cars and houses)
- Earn less than R7500 a month
If 9.5 million people were to get hold of the NCR on the day that it goes live then the NCR could expect to receive 1.1 million calls an hour on the first day. If people are polite and take turns over the entire first month then the NCR could receive 49 479 calls an hour (or 824 calls a second).
WILL DEBT INTERVENTION GET RID OF YOUR DEBT?
For those who qualify, it is exciting to think that you may no longer be trapped in debt and that your debts might be written off overnight.
For the majority of consumers who apply and are accepted for this process, it is totally unlikely that this will happen. The first goal of debt intervention is not to write off the debt or even postpone repaying debt. It is to get people to pay something they can realistically afford towards their debt each month.
Step two would be postponing payments for a while, especially where people have lost their job or have no work and only in extreme cases where consumers are destitute for years are debts expected to potentially be written off. This would only be after several years of being in the process. Writing off debt has been one of the hot debates around debt intervention and why the banks were so opposed to the new law. In fact, the banks may still go to court over the new law and might try to get it ruled as unconstitutional to write off their debt.
Reference: https://debtfreedigi.co.za/wp-content/uploads/2019/08/Debtfree-Magazine-August-2019.pdf
