First printed in Consumer News Namibia magazine - Feb 2013 edition
"Credit buying is
much like being drunk. The buzz happens immediately and gives you a lift....
The hangover comes the day after." Joyce Brothers
Many consumers struggle to repay their debts. I have heard
percentages as high as 70% of income is being used to repay debts. Many young
people are ending up financing their lifestyle (which they cannot afford)
through credit. Many consumers need help with restructuring their debts. The
Namibian Financial Supervisory Authority (NAMFISA) is proposing a Financial
Institutions Bill that will provide for debt counselling as part of the
assistance to consumers.
Before discussing the new debt counselling I would like to
add that there are other factors at work besides the servicing of debt; they include
income volatility, legalised gambling, bigger medical bills and a cultural shift that has de-stigmatised
bankruptcy and bad debts.
So what is the difference between the present administration
order and the new debt counselling?
The idea behind Debt Counselling is to help clients reduce
their overall debt with creditors in the most cost effective way. An
Administration order can take a large part of your disposable income to offset
the relatively high cost.
Debt Counsellors are proposed by the Financial Institutions
Bill in order to specifically deal with people in trouble with their finances.
These debt counsellors will have the support of and have to be approved by the
Government. An administration order is presently used with the view to resolve an
individual's over indebtedness. However this method can be very costly and with
various limitations.
Unlike under an administration order, 95% of your monthly
payment will go to your creditors under a debt counselling plan. A debt
counselling plan will manage all your payments to creditors from a central
distribution agency on a monthly basis on your behalf.
Under administration, distribution by Lawyers is only done
once every three months after all their costs have been deducted (In some cases
it can take longer than a year before your creditors' receive any form of
payment).
Remember, that once a debt counsellor has accepted your
application, they will inform all your creditors that you have applied for debt
counselling. You will not be able to access any further credit until your debts
have been repaid. You will even have to cut up your credit and store cards such
as Edgars, Markhams, etc.
At present, there are no accredited debt counsellors in
Namibia. This is a new occupation and training will have to take place to
ensure the consumer gets the full benefit of this new law.
Training of Debt
Counsellors
The new Act could become law within the next two years. Once
enacted, there will have to be a process of training Debt Counsellors to assist
consumers.
If we follow the proposed Bill (as it is copied from the Act
in RSA) to become a debt counsellor, Namibians have to be over the age of 23
and have a minimum of two years experience in accounting, finance, legal,
para-legal or credit fields. Aspiring
debt counsellors will also have to have a clean credit record - have no
debt-related judgments against them at the time of applying and not be under
administration.
A debt counselling course over five days covers general
outcomes such as listening and communication skills, interviewing skills, as
well as budgeting and personal financial management know-how. It also requires specific outcomes regarding
the debt counselling process as stipulated in the proposed Bill - from filling
in an application for counselling to obtaining a clearance certificate.
