Credit regulator’s new guidelines bring relief for financially distressed consumers

New guidelines recently issued by the National Credit Regulator require creditors to cancel existing payment arrangements within three days of receiving a proposal to rearrange the debts of a consumer who has entered debt review.

Creditors are expected to act in good faith and follow the debt review process, and may not terminate or enforce legal action in the first 60 business days of the application.

The new guidelines are expected to bring much-needed relief to financially distressed consumers as creditors will no longer be able to continue deducting amounts owing from their bank accounts or salaries after receiving the debt rearrangement proposal.

The NCR’s guidelines affect payday loans, bank set-offs and the cancellation of existing payment arrangements for consumers in debt review.
 

Some creditors drag their heels

Debt counsellors can’t cancel credit payment arrangements such as a bank-to-bank stop order,  a third-party debit order, and an emolument attachment order. They rely on banks, credit providers or human resource departments to do so. It can be onerous to get all credit providers to cancel their payment arrangements while a new repayment plan is being drafted and agreed to by all parties.

During the first 60 business days of the debt review negotiations, a credit provider may delay or refuse to cancel the payment arrangement, preferring to wait for a court order specifying the new payment terms. According to Benay Sager, executive head of DebtBusters, these delays often come from smaller lenders, such as those offering microloans or payday loans, as they are not always geared up to deal with such requests.

“It causes delays in paying towards restructured agreements, and sometimes the debt counsellor is unfairly blamed if the situation becomes messy,” he says.

Certain credit providers also apply a set-off, where they use available funds in a consumer’s account to settle outstanding debts. According to Casper le Grange, national executive committee member at the Debt Counsellor’s Association of South Africa, this practice is particularly problematic during December salary payments, bonus months, and months with many public holidays resulting in early salary payments. “A consumer may discover that their account has been debited unexpectedly, leaving them unable to meet their financial commitments,” he explains.
 

Impact on consumers

Inconsistencies in terminating existing payment arrangements cause protracted financial distress for the consumer, who needs money to live, pay debt review fees and service their debt.

Debt review is intended to provide a structured and affordable way for a consumer struggling with debt to repay what they owe; however, creditors may not always view it that way. Sager believes that perceptions around debt review need to change. “People who apply for debt review are responsible and want to repay their debt and should be respected for this,” he explains. “We need to change perceptions so that debt review is a more acceptable topic of conversation, rather than something to avoid.”

Addressing the problem

In January 2025, the National Credit Regulator (NCR) issued new guidelines stating that once a creditor receives a debt rearrangement proposal (a Form 17.2), they have three days in which to cancel existing debit order and salary deduction arrangements. This includes “payday” loans, which are often offered by microfinancers. These debts are now treated in the same manner as other debts and must be included in the debt review process. The guidelines also state that if a consumer has a bank account used solely for debt review, and money is paid into that account erroneously, these funds can’t be used to recover debt.
 

Easing the pain for consumers in debt review

The new guidelines will prevent unfair collection processes and nasty surprises from unexpected deductions. Consumers will be able to better manage their finances and reduce their financial stress. According to Sebastien Alexanderson, head of National Debt Advisors, streamlining the procedure and establishing clear expectations for credit providers will enhance the debt review process. “It should become faster and more efficient, allowing people to achieve financial stability faster.”

He also suggests that when a consumer enters debt review, they should open a savings account with a bank with which they don’t have any debts. This prevents unnecessary deductions and ensures that consumers have full control over their available funds, making it easier to commit to the debt review process without additional financial setbacks.

 
Reporting of non-compliance

These guidelines provide a clear directive for credit providers under the National Credit Act (NCA) and the NCR Task Team Agreement Guideline. Debt counsellors can report non-compliant credit providers to the NCR, and must include copies of the document informing credit providers that debt review has begun (Form 17.1), the debt rearrangement proposal with confirmation it was sent, the responses received and the request for cancelling of the debit order or payroll deduction.

“Non-compliance can lead to enforcement actions from the NCR, including formal notifications and potential penalties,” explains Alexanderson. “Therefore, adherence is crucial.”

Debt counsellors are cautiously optimistic

The debt review industry is slowly evolving, so these guidelines are a step in the right direction. Le Grange believes that they will create a more predictable and consumer-friendly debt review process. “However, success depends on enforcement,” he warns. “If credit providers don’t comply, debt counsellors must actively report cases to the NCR and, if necessary, invoke sections 157 and 161 of the NCA to address non-compliance.”

The guidelines should alleviate some of the immediate financial pressures faced by consumers entering debt review. Additionally, the NCR’s clear and structured approach enhances the overall effectiveness of the debt review process, which benefits consumers while also contributing to a healthier credit system.

“We anticipate seeing a more co-operative and co-ordinated effort from all parties involved, which is essential for the success of any debt restructuring effort,” adds Alexanderson.

Sager believes it’s all about perspective. “If you compare where we were five or ten years ago, it’s a significant improvement,” he says.