A debt management agency works on the premise that consumers come to them for debt management help, and in return for a minimal fee, they can help a consumer pay off their debts without facing legal action or losing their assets.
Debt management agencies are regulated by The National Credit Act. When it came into effect in 2007, the act allowed for the establishment of debt management agencies. Before that consumers did not have the option of the asking for debt management help, and could only take drastic steps when it came to debt.
When a consumer approaches the debt management agency, they are allowing the agency to take over their financial planning for a limited time. During this time, the agency takes it upon itself to restructure the debts of the consumer – thus determining how much disposable income they have and what amount can be spent on debt payments monthly. Once they determine this, they can negotiate with creditors and in doing so reduce payments, interest rates and extend payment periods.
Debt management agencies are regulated by the NCR and the DCASA, and under the codes of conduct laid down by these two regulators, they work quickly and fairly.
A debt management agency works for the consumer, with consumer rights being at the heart of their enterprise. They protect consumers, but at the same time ensure that creditors do eventually recover what is owed to them. Thus a debt management agency is the only debt remedy that ensures the satisfaction of both the consumers and the creditor.
Article written by: Andrea van Tonder 07-2013