Debt mediators challenge the National Credit Regulator

The National Debt Mediation Association (NDMA) has resolved to challenge in a daring way the National Credit Regulator (NCR) which decided last week to categorise NDMA’s voluntary debt mediation practice as a contravention of the law.

The NDMA issued a strong statement this week which suggests that it might overlook a decision taken by the regulators in what might precipitate an all out war.

The NCR ruled to almost ban voluntary debt mediation after the debt counseling industry complained that NDMA’s practices touted as an independent service was biased towards credit providers, prejudicial to customers, and as such a contravention of the National Credit Act. The NCR ordered the NDMA to cease its pilot project titled Voluntary Debt Mediation Solution.

The ensuing fight takes form of a fight between debt councilors and debt mediators over the spoils of rehabilitating financially distressed consumers. An initiative of the Banking Association of South Africa the NDMA’s voluntary debt mediation takes away business from statutorily empowered debt counsellors.

In a statement released yesterday the NDMA said it respects the role of the NCR and the rule of law. “The NDMA will therefore follow the procedures set out in the National Credit Act to address the findings of the NCR regarding the Voluntary Debt Mediation Solution (VDMS) pilot project. The statement said the NDMA will continue to carry out its mandate in terms of the approved Credit Industry Code of Conduct to Combat Over-indebtedness”. It added that part of this mandate includes providing a mediation service to debt counsellors and consumers who are not able to resolve their disputes with Credit Providers.

“The VDMS pilot was a good faith attempt by the credit industry to address a serious and existing problem faced by millions of consumers who at present face a bleak existence due to financial hardship caused sometimes by events outside of their control. The issues raised around the VDMS pilot will not impact the normal work of the NDMA and the services it has been providing to consumers and debt counsellors. Our reports show that the NDMA has made a tangible difference to the lives of hundreds of consumers who had nowhere else to go”.

NDMA CEO, Magauta Mphahlele says an orchestrated attack on the NDMA and its leadership in the media by a debt counsellor has been used to create the impression that the NDMA is somehow biased towards credit providers and had deliberately set out to contravene the law.  She said the problem of over-indebtedness in South Africa is bigger than individuals or individual entities. It is a national problem that affects millions of individuals and households and that requires constructive debate with the aim to find effective solutions. The NDMA will continue to pursue the debate and the quest to find solutions using the correct forums.

“The over-indebtedness debate should not be turned into a turf war between debt counsellors, the NDMA and credit providers. An adversarial relationship between debt counsellors and the credit providers can only harm the consumer who will bear the costs of a possible fall out between debt counsellors and credit providers”.

The NDMA said it has an excellent working relationship with a majority of debt counsellors who appreciate the work that the NDMA has done in supporting the statutory process and in creating a harmonious working relationship between debt counsellors and credit providers. The consensual approach is a core principle of the NCA.

“The NDMA will not shy away from the fact that it is funded by credit providers. The consumer or tax payer should not carry the cost. The cost does not only relate to resolving disputes but also supporting preventative measures, like consumer education, something that the NDMA has done on a large scale”.

Magauta said the NDMA’s impartiality is best demonstrated by the results of its 2011 annual reports which show that the NDMA found in favour of the consumer in 77% of cases finalised.

“The role of mediation is accepted and recognised widely in many arrears of the law but is new in matters related to debt enforcement. The VDMS pilot issues raised by the NCR present an opportunity for the role of the credit industry in combating over indebtedness in the context of section 48(1)(b) of the NCA to be debated”

“It also raises issues on how industry voluntary interventions can live side by side with statutory interventions. At this time we have a hybrid model in that the two depend on each other where the NCR Task Team Recommendations have been adopted by the Credit Industry to support the statutory debt review process.

“While the NDMA and the Credit Industry work to resolve the compliance and legal issues raised by the NCR, sight should not be lost of the fact that many consumers continue to fall between the cracks of the various remedies that exist in and outside of the NCA. These include administration, sequestration, debt review and normal debt enforcement through the courts” said Mphahlele

 

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