For consumers who enter debt counselling in good faith but are derailed by life-altering events beyond their control, relief may finally be on the horizon.
Although debt counselling is designed to offer structured relief to over-indebted consumers, the system provides little clarity for those whose circumstances change so dramatically that continuing becomes impossible. Without a formal mechanism to deal with incomplete debt-review cases, affected consumers can remain indefinitely flagged with credit providers and bureaux – a regulatory blind spot that the National Debt Counselling Association (NDCA) says urgently needs to be addressed.
The NDCA is developing a tightly regulated exit framework for “stuck” consumers as part of a broader push to professionalise the sector and curb abuse.
In October last year, the Association put its proposal before the Department of Trade, Industry and Competition, the National Credit Regulator, and other debt-counselling industry players. Developed through a series of engagements, it seeks to raise standards and shut out unregistered or unethical operators.
The proposal is now under review by regulators and industry stakeholders.
It details fit-and-proper requirements for practitioners, based on existing regulations in the National Credit Act (NCA), enhanced by provisions in the Conduct of Financial Institutions Bill, and the Treating Customers Fairly principles.
Read: NDCA pushes for fit and proper requirements for debt counsellors
René Moonsamy, the chairperson of the NDCA, says they hope the entire proposal, or at least a substantial number of the recommendations, will be included in amendments to the NCA and its regulations.
“This will help professionalise the sector, get rid of fly-by-nights and chancers,” says Moonsamy. “It would also help bring TCF principles to debt counselling and bring it in line with the rest of the financial services industry.”
A missing exit – and the risks it creates
The proposed exit framework is intended for over-indebted consumers who enter debt counselling in good faith but are unable to complete the process due to unforeseen circumstances. When this happens, consumers’ debt is not fully settled, and they remain listed as undergoing debt counselling with credit providers and bureaux.
According to Moonsamy, the lack of a standardised exit framework leads to consumer frustration, and opportunities for scammers who offer “remove debt counselling” services by misusing their debt counselling licences.
“There must be an accepted, transparent framework to deal with incomplete debt-counselling cases, so consumers are not left in limbo and have a means to have an orderly financial rehabilitation without falling prey to scams,” she says.
Defining the consumers who fall through the cracks
A central challenge in reforming debt counselling lies in clearly identifying the consumers for whom the process no longer works as intended.
The NDCA has coined the term “stuck” consumers to describe a narrowly defined group whose inability to complete debt review stems not from bad faith, but from profound and permanent changes to their financial circumstances. Examples may include sudden loss of income, serious illness or disability, the death of a primary breadwinner, or other exceptional events that permanently and materially alter affordability.
“The intention is not to create a broad or easily invoked exit, but rather a narrowly defined, evidence-based mechanism for genuinely exceptional cases,” says Moonsamy.
The NDCA envisages that any determination of eligibility would occur within a regulated framework, applying clear, objective criteria and appropriate oversight.
Moonsamy says that although the precise mechanics are still being developed, the guiding principle is that exits should not be discretionary or informal, but subject to transparent and legislated standards, documentation, and accountability that is consistent with consumer protection objectives.
“The NDCA fully recognises that an exit from debt counselling does not equate to settlement of outstanding debt,” she says.
The proposed framework is therefore not intended to extinguish obligations to credit providers, but to facilitate a regulated and orderly transition where debt counselling is no longer viable.
“This includes ensuring that all parties understand the consumer’s status, rights, and obligations post-exit, and that exits do not undermine contractual or statutory obligations but rather operate within them.”
Fair exits, compliant reporting
Moonsamy emphasises that any implications for credit bureau reporting would need to be carefully aligned with existing legal and regulatory requirements.
The NDCA’s concern is to avoid situations where consumers remain indefinitely flagged as under debt review despite no longer needing reprieve or being able to participate in debt restructuring.
“The framework will aim to promote accuracy and fairness in credit reporting, while supporting longer-term financial rehabilitation rather than creating unintended barriers to recovery,” she says.
Moonsamy says she anticipates further engagement with regulators and stakeholders before any final proposal is released publicly.
“While it is difficult to provide a definitive timeline, our intention is to share more detailed proposals once regulatory consultation has progressed,” she says.
