NDCA pushes for fit and proper requirements for debt counsellors

The National Debt Counselling Association (NDCA) has proposed the introduction of fit and proper requirements for debt counsellors.

If the proposal is adopted, it will enhance standards in the sector and prevent unregistered or unethical practitioners from posing as legitimate debt counsellors, the NDCA said in a statement this week.

René Moonsamy (pictured), the newly elected chairperson of the NDCA, said debt counsellors hold positions of trust, guiding financially vulnerable people towards sustainable debt management.

“Arguably, the debt counselling licence is the single most important financial services licence granted in South Africa. This proposal aims to align the debt counselling sector with the rest of the financial services industry.”

The proposal was submitted to the Department of Trade, Industry and Competition, the National Credit Regulator, and other debt counselling industry players during a series of engagements in October.

The NDCA, which is in the process of changing its name from the National Debt Counsellors’ Association, said its eight members cover 50% to 55% of the debt counselling sector.

The Association said the fit and proper requirements will be based on the existing regulations in the National Credit Act but enhanced by the provisions of the Conduct of Financial Institutions (COFI) Bill and the Treating Customers Fairly (TCF) principles.

The proposed fit and proper requirements include:

• Increased competence requirements, including higher levels of minimum recognised qualifications, more direct relevant experience, and an apprenticeship in the role before becoming fully qualified. These would supplement the existing requirements, including completion of a regulatory examination, continuous professional development, and continued monitoring of good standing, such as SARS and criminal clearance, as part of licence renewal.
• Honesty, integrity, and good-standing provisions requiring practitioners not to have criminal convictions related to fraud, dishonesty, or financial misconduct. A background check will include criminal record and financial history verification. Practitioners will have to complete an annual fit-and-proper assessment.
• Operational ability, with the resources, processes, and systems to conduct business effectively and fairly. Practitioners will also need to comply with governance and risk-management standards and must regularly review these. They will have to demonstrate financial stability and comply with financial reporting requirements.
• Oversight requirements will clarify roles for key individuals (registered debt counsellor) and representatives (debt counsellor in training), similar to the way key individuals operate in insurance. Debt counsellors in training will work under the supervision of a registered debt counsellor for a certain period before they may register themselves.

The NDCA believes that applying COFI to the debt counselling industry will ensure uniform standards of conduct across all financial institutions. It will improve consumer protection by addressing misconduct, conflicts of interest, and unfair practices, and enhance transparency and accountability.

The Association has also proposed that debt counsellors be required to incorporate the TCF principles into their business models. The principles consist of six fairness outcomes: a customer-centric culture; products and services that meet consumers’ needs; clear, transparent communication; suitable, unbiased advice that is in the interests of consumers; products and services that meet expected standards; and fair, efficient complaint-handling.

The NDCA said it hopes that some of the recommendations will find their way into the amendments to the NCA and its Regulations.