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Consumers in debt counselling pay for legal representation, over and above their debt counselling fees.

The legal fee, which is about R3 000, is paid in your second month of debt counselling, from money that would otherwise be used to pay off your debt.

This article was first published in the third-quarter 2015 edition of Personal Finance magazine.

Gone are the days when you could get away with claiming that you earned, say, R55 000 a month and spent R1 000 a month on food.

Debt counsellors have long contended that, all too often, there is no evidence that a creditor checked a consumer’s credit report when it granted credit.Deborah Solomon, a debt counsellor and the founder of DCI (an online information portal for debt counsellors and consumers), says the prescribed affordability assessment will go a long way towards preventing reckless lending, which begins when the credit provider does not process the application for credit properly. Enhanced powers of the tribunal Before the Act was amended, if your debt counsellor believed that he or she had evidence that you were a victim of reckless lending, the counsellor had to engage an attorney to apply to a magistrate’s court for an order of reckless lending against your creditor.Although debt counsellors could make the application themselves, most of them preferred not to do so, because they might come up against the credit provider’s attorney.“Consumers who were struggling to pay their existing credit agreements were granted new credit without regard to the real consequences …especially if legal action had to follow.” The amendments to the NCA herald a higher level of protection for consumers in the credit market, he says.Since the National Credit Amendment Act came into effect in the middle of March 2015, credit providers have been obliged to verify what you earn by checking your three most recent payslips and bank statements, and they must apply the “minimum expense norms” to what you declare as your essential monthly expenses.

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