Debt counselling can provide important legal protection for consumers who are genuinely over-indebted, but it is not a short-term solution and carries long-term consequences that are not always well understood.
The Credit Association of South Africa (CASA), which represents the country’s non-bank credit sector, says misunderstandings about how debt counselling works can lead consumers to enter the process without fully appreciating its implications.
“Debt counselling plays an essential role in protecting vulnerable consumers who are in real financial distress,” says CASA chief executive Leonie van Pletzen. “However, it is a formal legal process with long-term consequences. It is not designed as a convenience or savings tool.”
Debt counselling was introduced under the National Credit Act in 2007 as a mechanism to assist consumers who are unable to meet their debt obligations. Eligible consumers may apply through a debt counsellor registered with the National Credit Regulator (NCR), who must conduct a full affordability assessment.
If the consumer qualifies, the debt counsellor negotiates revised repayment terms with credit providers. The proposed arrangement must then be confirmed by a magistrate’s court or the National Consumer Tribunal.
During this process, consumers are protected from legal enforcement action by credit providers.
“This legal protection is critical for consumers who are genuinely over-indebted,” Van Pletzen says. “But because it is a legal process, it also brings obligations and restrictions that can affect consumers for years.”
CASA says consumers experiencing short-term financial pressure should first engage directly with their credit providers before entering debt counselling.
“Our message to consumers is clear,” Van Pletzen says. “If you are under temporary financial strain, your first step should always be to speak to your credit provider. In many cases, providers can offer payment arrangements or temporary relief without triggering the lasting implications of formal debt counselling.”
Debt counselling, she adds, is intended for sustained financial difficulty rather than temporary cash-flow pressure.
According to CASA, consumers considering debt counselling should be aware of the following:
- The process is voluntary and must be conducted by an NCR-registered debt counsellor. Consumers are entitled to request the counsellor’s registration number.
- A full affordability assessment is required, and not all consumers qualify for debt counselling.
- A debt counselling flag will appear on the consumer’s credit profile.
- Consumers may not apply for further credit while under debt counselling, except in limited circumstances, such as where only a home loan remains up to date.
- Debt counselling is not free. Fees are regulated and form part of the repayment arrangement.
- Consumers married in community of property must apply jointly, with the consent of both spouses.
- A clearance certificate is issued only once all restructured debt has been settled, at which point the credit profile flag is removed.
Caution around ‘too good to be true’ offers
CASA warns consumers to be cautious of unsolicited calls, messages, or advertisements promising instant debt relief, guaranteed approval, or sharply reduced interest rates.
“Consumers should be particularly careful of any offer that sounds too good to be true,” Van Pletzen says. “Some agents fail to clearly disclose that they are placing consumers into a formal debt counselling process.”
She cautions that some operators falsely claim to represent the NCR.
“The NCR does not contact consumers to initiate debt counselling,” Van Pletzen says. “Debt counselling must be formally initiated through a prescribed application process. This includes the completion of the required forms, a full financial assessment, formal notification to credit providers and credit bureaux, and confirmation by a court or the Tribunal.”
Although initial contact or information-sharing may occur telephonically, she adds, a debt counselling arrangement cannot be completed or made binding based on a verbal agreement alone.
Consumers, CASA says, should be cautious of any process that appears rushed, unclear, or lacks written documentation.
Despite these cautions, CASA emphasises that debt counselling remains an effective mechanism when used appropriately and managed by registered professionals.
According to the NCR’s 2023/24 annual report, 47 757 clearance certificates were issued to consumers who had successfully completed the debt counselling process.
“Debt counselling works,” Van Pletzen says. “But it works best when it is used for the right reasons, with the right professionals, and after consumers have first explored direct engagement with their credit providers. Debt counselling is a legal protection, not a shortcut, savings strategy, or convenience tool.”
A full list of registered debt counsellors is available from the NCR at www.ncr.org.za or 0860 627 627.
