Debtfree Issue 202303 - DB SE

SPECIAL
EDITION
HOW
BANKS
DIE
Issue 03 of 2023

EXCELLENCE IS DOING
ORDINARY THINGS
EXTRAORDINARILY
WELL
– John W. Gardner

WHAT MAKES US
EXCELLENT?
/ Unimpaired and automated PDA systems
/ Integration with top-ranked Debt Counsellor systems
/ Best customer support in the country – queries are resolved within 24 hours
/ Strong compliance and best-industry-practice implementation is at our centre
Call Saishen Krishnan
Head of Hyphen PDA | 071 884 7300
Or call our friendly support centre on 011 303 0060 - Option 2
or visit our website www.hyphenpda.co.za

FROM THE EDITOR
For hundreds of years, Swiss banks have been the
“golden child” of banking. They had a reputation
for being the safest place to keep your money.
Through wars and regime changes, plagues and
pandemics, they have stood bastions of banking.
This month that illusion was shattered. And with it we are forced
to realise that banks are just businesses too, and face external and
internal pressures that can derail them. That’s not to say we have
never seen banks collapse. We have, but those banks seemed
reckless and unstable compared to the famous Swiss bank.
It’s been a real eye opener for many people. Banks and banking
have always been something of a shadowy world. Not that banks
are hiding anything sinister, but how they operate is not simple and
most of us were never taught at school about how banks work or
how they could fail.
In this issue we take a bit of a peek below the hood to see how the
banks make their money and how they lose it. We consider what
can be learnt from the current banking crisis that is spilling across
the globe, and we discuss how it will impact us.

FROM THE EDITOR
We also talk about trust, trust is not easily given. So, it can be
hard when you enter debt review and are asked to trust a Debt
Counsellor. We discuss some situations that can test our trust,
and how we can think about things and know who to trust in
that moment.
If you are looking for a Debt Counsellor, Attorney, PDA or credit
provide then head to our service directory section. We also have
other news and great advice. Is it a good idea to pawn your car
with one of those deals where you still get to drive the car? Well,
we talk about that and other tips and tricks.
In 2020 we learned that pandemics can happen overnight. In
2021 we learned that even the American political system can face
a coup. In 2022 we learned that war can break out in the most
unexpected places, and this year we are fast learning that the
institutions we think are so stable, are also open to system shock.
In the midst of all that uncertainty, what can we rely on? Not, Swiss
banks. No but, hopefully you can rely on your family and friends.
You can also rely on prices to increase and your salary to feel like it
is shrinking. You can also rely on debt making you feel stressed and
bad. So, trust those helping you and carry on paying off your debts
as fast as you can. That way you can say you are debt free.

FROM THE
DESK
AMENDMENTS TO THE
NATIONAL CREDIT
ACT COULD HELP
MUNICIPALITIES AND
SCHOOLS RECOVER
BILLIONS
Including municipal rates
and school fees as part of
debt restructuring would be
a win-win for consumers,
schools, municipalities.

Municipalities, schools and body corporates, amongst others, could
see improvements in outstanding payments if adjustments were
made to the National Credit Act to allow the restructuring of these
debts in debt counselling.
Municipal rates, levies, school fees, money owed to medical practices
and attorneys and other similar debts fall outside of the National
Credit Act as it currently stands. This means debt counsellors cannot
renegotiate these debts.
A Statistics SA report on civil cases for debt shows that consumers are
increasingly tending not to repay this kind of debt.
Summonses issued for debt relating to services, which comprise
mainly municipal rates, increased by around 25% in November 2022
both for businesses and individuals, compared to the same month
in 2019. Comparative data for school fees and tuition, for the same
periods, show increases of up to 33% for judgements.
At the same time the volume of overall summonses have decreased.
“It’s likely that some creditors are realising that getting a summons
isn’t the most effective way of recovering what’s owed and financially
stretched consumers are prioritising debtors who shout the loudest.
Typically, these are businesses rather than schools and municipalities,
which is why a lot more people are behind on repaying this kind of
debt,” says Benay Sager, chairman of the National Debt Counsellors
Association, of which DebtBusters is a member.
The 2022 data was compared to 2019 as this is the first pre-Covid years.
Data for 2020 and 2021 is not typical because of Covid-19.

It’s fair to assume that if summonses have increased by 25% over the
past three years that the value of what’s owed has grown by the same
proportion, he says.
Debt counselling is a tried, tested and effective tool for consumers
dealing with high debt levels. Evidence of this is the number of people
to successfully complete debt counselling and get their clearance
certificates, which has increased five-fold over the past six years.
“We also know that from experience that when different debts are
consolidated into a single monthly repayment, as they are in debt
counselling, consumers have a higher repayment ratio because they
don’t pick and choose which debt to repay.”
The NDCA’s view is that including particularly rates and school fees
when amendments to the National Credit Act are considered would
be a win-win, both for consumers struggling with high debt burdens
and debtors currently excluded such as schools and municipalities.
“Expanding the NCA to allowing debt counsellors to renegotiate
municipal rates and similar kinds of debt would be a more effective
way for municipalities and others to recover the billions they’re
currently owed.”

CONTENTS
THIS IS HOW BANKS DIE
LEARNING TO
TRUST YOUR DEBT
COUNSELLOR
SOCIAL MEDIA
AND FEELING
FOMO
NEWS
SERVICE
DIRECTORY
DISCLAIMER
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much information as possible. However, reporting inaccuracies
can occur, consequently readers using this information do so
at their own risk. Debtfree Magazine makes content available
with the understanding that the publisher is not rendering legal
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mentioned herein are believed to be reputable, neither
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on this site and/or magazine or any part of this publication
without a written consent from the editors’ panel and the
author of the content, as applicable. Debtfree Magazine,
authors and contributors reserve their rights with regards to
copyright of their work.

DEBT REVIEW
Credit Providers often use outside
companies to collect debts for them.
This is why people will say things like:
"I am calling on behalf of Bank X".
If you are unsure who you are
talking to then you can ask them
directly for a name and ID Number
or you can hang up and you can
call the credit provider directly
instead.

No more debt-stress.
Let’s get it sorted.
We’ll get your interest rates right down. You’ll
make one consolidated payment a month. You’ll
have more cash to live on. Your assets will be
legally protected. Sorted.
0861 365 910
www.debtbusters.co.za
info@debtbusters.co.za

THIS IS
HOW
BANKS
DIE

DEBT REVIEW AND YOUR CREDIT SCORE
BANKS CAN
FAIL
Banks are an essential part of our modern economy.
It’s hard to imagine life without banks. They provide
financial services to individuals, businesses, and
governments. They are safe place to store your money,
and a place to get credit when you need more than
you have right now.
Some banks are the biggest and most stable businesses in the entire
world. Some have a bigger income than the countries that they
operate in, they seem so stable.
But, banks can and do collapse.
Even though they seem so essential and stable, like any business,
banks are not immune to failure, and the collapse of a bank can have
serious consequences for the broader economy.
Recently, many banks have found themselves in real trouble, some
have collapsed under the pressure. Banks are in trouble!
Let’s talk about why this is happening and look at some examples, like
Lehman Brothers in 2008 and both Silicon Valley Bank, and Credit
Suisse in 2023 to see how banks could die.

DEBT REVIEW AND YOUR CREDIT SCORE
A DIFFICULT TIME
FOR BANKS
Banks are a safe place to keep your money. When you
have money that you want to save, it is not a great
idea to hide it under the mattress. Much better to take
those funds to a bank, and pay to keep that money safe
(and to have it insured).
The banks, in turn, use that money to run their other business of
investing and trading. They also use some of that money to give
other people loans or credit. They charge interest and thereby make
money.
Because banks no longer have to have gold on hand to match what
they lend out, governments and regulators demand that they at least
have some money on hand (and insurance). The amount they are
allowed to lend out is closely linked to how much they have saved
with them.
These days we all know, that it is hard to save. Very few people are
able to save anything at all.
Banks also have a lot of competition these days, more and more
digital banks are entering the market. This means the banks are
fighting over a small group of clients.

Even giving people credit, which is very profitable for banks, is
becoming harder. These days, the banks have to check that you can
actually afford to repay the money you borrow. They also have to
double check the information you give them when you apply for
credit.
More than that, because so many people do not have jobs, they
cannot really afford credit. Young people in particular are not getting
work, thereby not qualifying for credit.
This results in banks having less money saved with them, fewer
clients, and are making less profit due to fewer people qualifying for
credit.
Banks are experiencing challenges that they have rarely seen before.

DEBT REVIEW AND YOUR CREDIT SCORE
HOW BANKS MAKE
MONEY
You may wonder: How do banks
make their money?
It’s complicated. At its core, they make money
by charging for services like protecting your
money, and charging people who want to
borrow money (eg. initiation fees and interest).
Banks also have shareholders who buy into
their bank, and thereby have a small say in
how the bank is run, and get a bit of the profit
when the bank is doing well.
Investors may take on shares, or may invest in
various types of bonds that the bank offers. This
provides the bank with more money to use.
Let’s dive a little into the mysterious way banks
work, and look at what they do and see how
that can leave them exposed. To start with
let’s figure out what stocks and bonds are, and
how securitisation works. Then let’s see how
banks make money and how they can lose it.

DEBT REVIEW AND YOUR CREDIT SCORE
SHAREHOLDERS VS BONDHOLDERS:
WHAT’S THE
DIFFERENCE?
When you own a share in a bank, you are a
shareholder. This means that you own a small piece of
the bank, and you have a say in how the bank is run.
You might get to vote on important decisions e.g. who sits on the
bank’s board of directors. Shareholders also have the potential to
make money if the bank’s stock price goes up, because they can sell
their shares for a higher price than they paid.
On the other hand, when you own a bond issued by a bank, you are
a bond holder. This means that you have lent money to the bank and
the bank has promised to pay you back with interest.
Bonds are a type of loan that investors make to companies,
governments or other organizations. The bondholder receives regular
interest payments from the bank over a set period of time, and at the
end of that period, the bank repays the initial amount of money that
was borrowed.
The main difference between a shareholder and a bond holder is the
type of ownership they have in the bank.

DEBT REVIEW AND YOUR CREDIT SCORE
WHAT ARE
BONDS?
No, not James Bond, the other bond.
Think of bonds like loans that people or
companies take out. When you buy a bond,
you’re essentially lending money to the person
or company (or bank) that issued the bond. In
return, they promises to pay you the amount
you loaned them, plus interest over a certain
period of time.
So, you lend them money now and you make
a profit over time as they pay you back the
loan amount with interest. It’s kind of how all
credit works these days.
Now, some bonds are considered riskier than
others. For example, if you’re lending money
to a company that’s struggling financially,
there’s a higher chance that they might not be
able to pay you back. So, if you invest in that
risky company’s bonds, you might demand
a higher interest rate to compensate for that
risk.

Similarly, bonds with longer maturities (the
length of time until the bond matures and
the issuer pays back the loan) also tend to be
riskier, since there’s more time for something
to go wrong. So, investors might demand a
higher interest rate on those bonds too.
The price of a bond can vary depending on
a few factors. For example, if interest rates
in general are low, then investors might be
willing to pay more for a bond that offers a
higher interest rate.
They want something that makes them more
profit than just a boring savings account.
Conversely, if interest rates go up, the price of
existing bonds with lower interest rates might
go down. This means those investments can
lose money.
So, to sum up: different bonds have different
prices and risks because they represent loans
to different borrowers with varying levels of
financial health and different maturities. The
returns on those bonds (the interest rates)
reflect those risks, and can vary depending on
market conditions.

DEBT REVIEW AND YOUR CREDIT SCORE
SECURITISATION
WHAT IS IT?
When you put your money in a bank,
the bank uses that money to make
loans and investments. Sometimes,
the bank might take some of the
loans and investments they’ve made
and package them together into
something called a "security".
A security is basically a bundle of loans or
investments that are sold to other people or
organizations in order to raise money.
For example, let’s say that a bank has made
various home loans to clients. The bank might
take a bunch of those loans and bundle them
together into a security called a "mortgagebacked
security". Then they will sell shares of
that security to investors.
When someone buys a share of a bank
security, they become part-owner of that
bundle of loans or investments. They’ll get

paid a share of the money that’s made from
those loans or investments, either in the form
of interest payments or dividends.
Bank securities are just bundles of loans or
investments that banks sell to investors as
a way to raise money that they then use for
other investments or costs.
There have been many court cases about
this topic and how securitisation impacts on
who really owns consumer’s mortgages and
who can collect on them when people miss
payments. It can be somewhat mysterious and
obscure.

DEBT REVIEW AND YOUR CREDIT SCORE
BORROWING &
LEVERAGING
You “need money to make money”, the saying goes.
One of the main reasons why banks collapse is
because of their heavy reliance on borrowing money
themselves, and then leveraging those funds to make
money before they have to pay it back.
Banks do not have vaults full of gold, like in the old days. In modern
times money is mostly 1’s and 0’s on a computer. In fact, you might
find that banks give people loans that are based almost totally on the
promise of money that the client will eventually pay back. Still, banks
are required to have at least some of the money they lend out or use.
Banks borrow money from depositors (their savings clients) and other
creditors and then in turn, they use that money to grant loans and
investments. This process is known as leveraging, and it can amplify
profits when things are going well.
However, it can also magnify losses when things turn sour. Since
banks have borrowed money, they also have to pay it back. To do that
they need to be making a profit or to borrow even more money (from
the reserve bank or investors) to make payments.
Sound familiar? We all know how hard it can be to repay debts to lots
of different people.

DEBT REVIEW AND YOUR CREDIT SCORE
FAMOUS BANKS THAT HAVE COLLAPSED
LEHMAN BROTHERS
Lehman Brothers is perhaps one of
the most famous example of a bank
collapse.
At the time, it was the 4th biggest bank in the
USA. By 2008, the investment bank had made
a lot of money by investing in different things
like stocks, bonds, and mortgages, but they
had taken on a lot of debt to do so.
Unfortunately, some of the investments that
Lehman Brothers had made were in the overinflated
US housing market. At that time, a lot
of people, too many perhaps, had been given
loans to buy houses, there was a false sense of
euphoria in the market and many people were
"flipping" house after house for a profit.
Lehman Brothers took over many of these
mortgages, then those people realised they
had too much debt and couldn’t afford to
repay them. As sales began to slow, the

problem got worse. As a result, a lot of houses
went into foreclosure (then the property is
repossessed). This caused the bank to end up
with so many repossessed properties, and no
one to buy them (because it had been over
priced in the first place and because no one
had any money to buy anything).
When that happened, the value of those
houses dropped suddenly, which meant that
the investments Lehman Brothers had made
in the housing market also lost value. This was
a big problem for Lehman Brothers, because
now they owed more money than they had,
and they couldn’t repay it.
As a result, the people and companies that
had lent money to Lehman Brothers started
worrying that they might not get their
investments back. They started to pull their
money out of the firm, which made it even
harder for Lehman Brothers to pay off their
debts. Eventually, the firm had to file for
bankruptcy.
That triggering a global financial crisis among
banks and other investment firms that had all
done the same, it was chaos!
We are still feeling the effects decades later.
Photo by David Shankbone used under Creative Commons Licence

DEBT REVIEW AND YOUR CREDIT SCORE
FAMOUS BANKS THAT HAVE COLLAPSED
SAAMBOU
Saambou Bank, was a local South
African bank founded in 1942. In
1970 it merged with Nasionale
Bouvereniging. They went public
in 1987 and traded under the name
Saambou Bank.
Saambou Bank was eventually the 6th biggest
bank in SA, and focused on personal loans
and mortgages to individuals. The bank
experienced financial difficulties in the early
2000s, and ultimately filed for bankruptcy
in 2002.
One of the reasons Saambou Bank
experienced financial difficulties was because
they lent money to high risk customers (kind
of how African Bank did). This meant that
the bank charged higher interest rates to
compensate for the risk, which made their
loans more expensive than those of their
competitors.

Like Lehman Brothers, who would fall not
too long after, the bank invested heavily in
property and suffered losses when the local
property market went down. As a result, the
bank didn’t have enough cash to repay their
debts.
The bank went into bankruptcy in 2002 after
newspaper articles appeared about it being
bankrupt and customers withdrew R1 billion in
just two days. Trading stopped and eventually
First National Bank took over some of its
business.
Fortunately, many smaller clients eventually
got some of their savings out of the bank but
the bank itself was done and was liquidated
in 2006. A dividend of R7.568 billion, or 4.53c
per share, was paid out to shareholders (the
share had traded at 203c per share before the
bankruptcy).

DEBT REVIEW AND YOUR CREDIT SCORE
FAMOUS BANKS THAT HAVE COLLAPSED
SILICON VALLEY BANK
Another example of a bank that suddenly got into
trouble is Silicon Valley Bank. They specialised in
investing in and assisting tech companies. In 2023,
the bank was hit hard by a series of high-profile tech
company failures.
Many of those companies dealt in cryptocurrency. When the value
of crypto fell suddenly towards the end of the pandemic, so did the
value of those businesses. As their values dropped, people stopped
investing in them, and those firms could not pay back what they
owed the bank or to save money in the bank like they had in the past.
As a result, SVB suffered significant losses on its loans to these
companies. Once people heard the bank wasn’t making as much
profit, they began to quickly withdraw savings and investments in the
bank, and this made other investors and clients nervous, the result
was a "run on the bank".

Photo by Minh Nguyen used under Creative Commons Licence

DEBT REVIEW AND YOUR CREDIT SCORE
FAMOUS BANKS THAT HAVE COLLAPSED
CREDIT SUISSE
When you were young, you probably
heard of spies or criminals who
banked in Switzerland. It was long
considered the safest place to bank
on the planet. One of the 30 most
stable banks in the work was based
in Switzerland for the last 160 years
and was called Credit Suisse.
What happened to Credit Suisse is very
interesting, the bank had been having issues
in the background, and was exposed to
some financial losses due to bad deals and
investments in the UK and USA.
They had also been issued big fines and
recently many clients had been withdrawing
funds (for a variety of reasons). This meant the
bank had to ask one of its newest investors for
more money. When they said no, things came
to a head.

Even though the bank had lots of assets and
plenty money in the vaults, the market was
very nervous after the demise of two big
American banks (one of them being Silicone
Valley Bank) and reacted with panic. This sent
the bank’s shares into freefall, losing 30%
value in one day.
That huge and sudden drop made investors
and other clients panic even more! Eventually,
the Swiss banking regulators had to get
involved and brokered a big deal to get
another bigger bank to buy them.
The buy-out deal had some unusual decisions
that have made certain types of bond holders
worldwide very angry and others very nervous.
That chaos is still going on.
Photo by Roland zh used under Creative Commons Licence

DEBT REVIEW AND YOUR CREDIT SCORE
WHAT IS A
"RUN ON THE BANK"?
When news gets out that a bank’s share prices are
dropping, or that some of their investment plans are
not working out as expected, this can make their
clients begin to panic, causing what is known as a run
on the bank.
A "run on the bank" happens when many people all start to worry
that a bank might not have enough money to give back to all of its
customers. They try to withdraw all of their money at the same time,
which can cause big problems for the bank. Often the situation will
snowball from just a few nervous clients, then a few more, then more
and more as the panic spreads.
When too many people try to take out their money all at once, it can
cause the bank to run out of cash. That’s because banks usually keep
only a small amount of their customers’ money on hand, and loan
out the rest to other people or invest it in different ways. If too many
people try to take their money at once, the bank might not be able to
get enough cash in fast enough to return it to everyone.
This can be a big problem because it can cause a bank to go
bankrupt. If a bank runs out of money, it really can’t pay back all of its
customers, and that can lead to a chain reaction of financial problems
for everyone involved. No wonder people panic.

DEBT REVIEW AND YOUR CREDIT SCORE
AS SAFE AS A
SWISS BANK
Recent years have shown that, like any business, banks
can fail. Bankers are some of the smartest people in
dealing with money and investing money but even
they are effected by what is happening around the
world. The world is an unstable and complicated place.
If someone in China gets flu, it can cause the world to go into
lockdown for years. We now have massive and destructive storms
and weird fire tornadoes and that’s before you consider the impact of
wars and climate migration.
Things like the creation of cryptocurrency and even digital banking
have had massive impacts on traditional banking and the profits
banks can make. A shrinking base of new clients, new investors and
a drought of people with money to deposit is putting banks under
pressure. When government agencies like the US Fed or SA Reserve
Bank put up the Repo Rate, this makes it even more expensive for
banks to borrow money or make money on existing investments.
Even the failure of other banks like SVB or Credit Suisse or when
bond holders don’t get paid out when things go wrong means that it
influence other banks to borrow money or insure their money. That in
turn puts all banks under strain, and makes it harder for them to make
a profit.

DEBT REVIEW AND YOUR CREDIT SCORE
BANKS CAN
DIE
Banks need our money to make money. They have
investors who give them money, but only if the bank
will make them a good return on their investment.
Global markets and global conditions are hard to predict, thereby
making consistent profit from investments almost impossible.
These days, investors are fickle and only want the most profitable
investments.
Investing has always been volatile and with the increases in
government regulation and the incredible speed of communication, it
is harder and harder to hide even the smallest financial difficulties and
it has become harder to keep investors calm.
These days fickle, nervous, demanding investors and easily panicked
clients can quickly withdraw their support and their cash in just
minutes. Runs on the bank are becoming more common.
The picture of the banks being too big to fail has truly been shattered.
We now live in the time when banks can easily die.

LEARNING
TO TRUST
YOUR DEBT
COUNSELLOR

LEARNING TO TRUST YOUR DC
TRUST MUST BE
EARNED
As children we first learn to trust our
parents. We develop this trust based
on their loving attention and care
for us, they feed us, come when we
call and catch us when we fall. They
provide a basis for all our future
dealings with other people.
Then later, as we age, we learn to trust our
friends, our friends’ parents and our teachers.
Along the way, we also learn who not to trust.
We get hurt, tricked and lied to. People break
our heart and our trust. We make deals and
agreements with people and they don’t stick
to their side of the bargain.
This is why trust has to be earned.

LEARNING TO TRUST YOUR DC
WHEN TIMES ARE
HARD
They say: when days are dark friends
are few.
Perhaps you have experienced this when you
hit hard financial times. Some of your friends
disappeared and sometimes institutions you
have banked with for years and years suddenly
turned on you and set their collections agents
on you.
This behaviour hurts your feelings and breaks
trust.
If your financial situation becomes very
difficult to deal with, then getting professional
advice is a good idea. Turning to NCR
registered Debt Counsellors who are trained
to help can be just what you need.

LEARNING TO TRUST YOUR DC
GETTING
HELP
The process of finding the right Debt
Counsellor is an important one, and
there are many factors which you
should take into account. You need
to find the right person to help.
Do your homework before you commit. Ask
to see the NCR certificate from whoever you
talk to, and make good choices!
When you do eventually find the right person
to help, and you sign those forms and send in
all your information and get that form 17.1 that
says you have applied for debt review, it can
feel like a huge weight has been lifted from
our shoulders.
Now instead of trying to deal with all the
stress and challenges on your own, you
now have somebody, who can be trusted, in
your corner. They help to put an end to the
persistent collections calls, ease your fear of
the Sherriff showing up at your door to take

all your stuff, and you no longer have to be
scared of letters of demand in the post of by
email.
But…
The challenge is that you suddenly have
to trust this individual or debt counselling
practice a lot. Your entire financial future
depends on it.
Also, the Debt Counsellor is going to be
asking you to make some big changes. What
you were doing, was not working, so it’s time
to make a change.
You might be asked to stick to a new,
improved budget. You may be advised about
where and how to bank. You might need to
make serious changes to your life - maybe
where you live or how you live, in order to
cover the debt repayments.
All this is hard.

LEARNING TO TRUST YOUR DC
TRUSTING
THE PLAN
Other than a new budget, you will
also be presented with a whole new
plan on how to settle your debts.
Normally, that new plan and repayment
figure is much more manageable than before
(maybe even half of what you used to pay).
And what’s more, in a few years, if you stick to
the plan, your debts will be totally gone.
Amazing!
But the snag is that for a long time you have
been making your own plans. You have been
doing whatever you want, and now you are
asked to stick closely to this tight budget
and to make payments every month without
missing a month.
This is a big change to how you may have
done things before.

LEARNING TO TRUST YOUR DC
PAYING THE
MONEY
Debt Counsellors never actually
touch your money. They help to
structure the plan for the courts and
they give instructions to the people
who do handle the money, but they
never touch it themselves.
The National Credit Regulator has registered
4 companies who handle the payment side
of debt review. You make one payment to
them, and then they split up the money and
distribute it on the right day, to the right
account, using the right references. These
companies are the Payment Distribution
Agencies or PDAs.
So, you deposit money into this new account,
or set up the debit, and you have to trust that
your money will get to your credit providers.

LEARNING TO TRUST YOUR DC
IT’S HARD TO TRUST A
STRANGER
Even if we have done our
homework, and even if we know
that the person who is helping us is
a professional Debt Counsellor with
a good reputation, it takes a lot of
trust to allow a relative stranger to
tell you how to live and what to do.
We listen because we are desperate, and the
situation is out of control as is. Surely anything
is better than living like that.
But the truth is that we have had limited
dealings with this new person and with the
entire debt review process and the debt
counselling practice so we might find it
hard to trust when certain situations arise,
especially at first.
Let’s briefly look at some things that might test
our trust and make us second guess the debt
review process or Debt Counsellor.

LEARNING TO TRUST YOUR DC
THE COLLECTION
CALL
You may get a call from a collections
agent who wants money. You calmly
tell them that you are under debt
review and they must talk to your
Debt Counsellor.
It gives us a feeling of satisfaction after all
those pesky calls to finally be able to tell
someone essentially: “talk to my lawyer”. You
will probably feel vindicated that you have the
situation under control.
But the collections agent might say something
to the effect that debt review isn’t showing on
their system, or that the payments you have
made are not reflecting.
Immediately your feeling of comfort is
shattered, you may begin to panic.

Here are some things to keep in mind:
They may call right at the start of the process
when you’ve only paid money through the PDA
once or twice. Debt review is a legal process
and all your credit providers know that in
month 1 and 2, your payment amount is set
aside to cover professional fees for the Debt
Counsellor, and your attorney. This is normal.
If someone says they are calling from the
“bank” and they are not getting any money,
stop and think about it. How can that be? You
know you paid. You know that the National
Credit Regulator checks on the 4 registered
PDAs each quarter and audits them regularly.
Also, you know that the Debt Counsellor
doesn’t touch the money so, they are not
stealing it.
You are probably dealing with a collections
agent, who works for commission based on
however much they can get people to pay
immediately. This can motivate them to say
things that are less than accurate.
Don’t stop trusting your NCR registered Debt
Counsellor because of a 2 minute phone
call from a stranger. That would be foolish,
rather get all the facts and speak to your Debt
Counsellor before doing anything rash.

LEARNING TO TRUST YOUR DC
WHEN YOUR DEBT
COUNSELLOR IS NOT GREAT
AT COMMUNICATING
It can be stressful if your Debt
Counsellor is not great at
communicating.
Good Debt Counsellors will keep in regular
contact with you, and make sure you get
updates about the process.
Some Debt Counsellors are however, not that
great at staying in touch, and not that great at
keeping you updated.
If they are bad at communicating with you
then… improve your communication with
them. Be specific and explain the situation in
a detailed way that makes what you need and
want very clear. Don’t give up on the process
because they are very busy and take a while to
return your calls or emails.
Pester them if you must, but stay in touch and
always let them know if you change email
address or phone numbers.

LEARNING TO TRUST YOUR DC
A MISLEADING
STATEMENT
What if you get a statement from your creditor that
shows you owe more money than before?
What if you have been paying for a while, and the debt is not
getting considerably smaller? Should you start to doubt your Debt
Counsellor?
It is important to realise that because your creditor charges interest,
each month your debt can grow if you pay less than the amount of
monthly interest.
Normally, this will not be part of your debt repayment plan. It is very
unlikely.
Right at the start of the process however, you will cover the Debt
Counsellor’s fee and the attorney’s fees in month 1 and 2. This means
that your debts might climb slightly those first two months.
Still, if you see a balance going up, you should definitely talk to your
Debt Counsellor because maybe the credit provider has not updated
their computer system to reflect the correct figures under debt
review.

LEARNING TO TRUST YOUR DC
DEBT SHRINKING TOO
SLOWLY
If you have been paying for around two years and you
are seeing that the debt is taking a long time to reduce,
you may begin to feel your Debt Counsellor is not
doing their job. You begin to lose trust in them.
Before you decide to do anything drastic, go have a look at the
official court order for debt restructuring (ask for it, if you don’t have
a copy). The court order shows you how many months each debt will
take to be paid off at the new arrangements. Often these plans are set
out over 60 months (or 5 years).
Debt review is often designed so that all your credit providers get paid
a fair amount each month. This can mean that even accounts with
small balances take a long time to get paid because they only receive
small monthly payments. If you are able to, then you can help speed
things up and begin to settle your debts sooner. How?
If you are able to pay off a small debt, then funds that were being
allocated to that account can now be shifted to another small debt.
This can settle that debt faster too. And so, more funds can be
allocated to another account, this snowball effect can make a big
difference.

LEARNING TO TRUST YOUR DC
LEARN WHO TO
TRUST
Most important is to get to know
more about the debt review process
and how it works. Educate yourself.
Get to know more about your Debt
Counsellor. Don’t let them be a
mystery to you.
TRUS
DE
COUN
Learn their name, their email address. Learn
where your Debt Counsellor’s offices are, who
works there, go visit them or interact with
them regularly.
This will build your trust in these professional
strangers, who are helping you get out of a
bad situation.

T YOUR
BT
SELLOR

LEARNING TO TRUST YOUR DC
LEARN WHO NOT TO
TRUST
Please beware of trusting a total
stranger who calls and says strange
things about your debt review that
may not be true.
Also please beware of anyone who calls you
and says that you can get out of debt review
sooner… as long as you pay money into a
different bank account.
Always contact your Debt Counsellor if you
get a call like that. It might be a scammer who
wants you to pay money into their account,
guess what happens if you do that… nothing
good.
If you have doubts or concerns about
anything during the debt review process, go
to your Debt Counsellor and discuss matters
with them.
Beware of strangers and learn to trust your
Debt Counsellor.

DEBT REVIEW
Because debt review is a legal
process that happens via the
courts there is no benefit to talking
to collections agents and credit
providers on the phone. It is
a waste of time.
It is better if they send court
documents to your attorneys
or submit those documents
to the courts.

FREE BOOKLET
TO DOWNLOAD AND SHARE
How do you leave Debt Review?
How do you have the Credit Bureau remove
the Debt Review listing on your credit report?
Leaving Debt Review Is Not As Simple As To Simply Stop Paying.
Consumers can only leave the debt review process at certain times
and in certain ways.
This free e book will help you navigate this process and avoid many
of the common mistakes people make when wanting to leave debt
review.
If you are curious about how you can leave debt review properly and
with no risk to your assets then be sure to download and read this
free booklet
DOWNLOAD AND SHARE

SOCIAL
MEDIA AND
FEELING
FOMO

SOCIAL MEDIA AND FEELING FOMO
THE DANGER OF
SOCIAL MEDIA
We all love social media. It might
be as simple as looking at peoples’
statuses on Whatsapp or scrolling
Facebook, Insta or TikTok for some
entertainment.
Scrolling social media can be addictive,
and there is a hidden danger that might be
influencing how you spend your money and
live your life.
The danger is the FOMO that social media can
give you and how that impacts what you do
with your money.

SOCIAL MEDIA AND FEELING FOMO
FOMO & EMOTIONAL
SPENDING
FOMO: the Fear Of Missing Out
is one of the leading culprits that
drives what is known as ‘emotional
spending’.
Emotional spending refers to the act of
spending money in response to emotions,
such as stress, anxiety, sadness, boredom, or
excitement, rather than a deliberate intention
to purchase something.
Emotional spending can also occur as a result
of social pressure or the desire to keep up
with others’ lifestyles. This type of spending
can lead to impulsive and unnecessary
purchases and relates to how we feel more
than what we actually need or can afford.

SOCIAL MEDIA AND FEELING FOMO
HOW COOL
ARE YOU?
We all want to have a nice life and be
liked and respected by others. We all
want to be one of the ‘cool’ kids.
In today’s world, social media presents
you with an endless 24/7 global stream of
aspirational living featuring a curated group
of friends, wealthy celebrities, and influencers
who eat expensive brunches, buy fancy
gadgets, and wear luxury clothing, all of which
can make us feel like our modest lifestyle is
inferior to theirs.
It’s hard not to feel the pressure to “keep up
with the Joneses” when social media gives
you a front-row seat to everyone’s highlight
reel.

SOCIAL MEDIA AND FEELING FOMO
FIGHTING
FOMO
If you are living on less, you probably have to stick to a
pretty tight budget each month in order to ensure that
you make your debt repayments. The danger then is
that FOMO might throw you off your game and wreck
your plans.
So how do you fight FOMO?
Limiting the time that you spend on social media is one key to taming
emotional spending. Look at who you follow and ask yourself: “Does
this person give me financial anxiety?” “Am I comparing my self-worth
to others?” If so, then unfollow or mute that feed.
If you want to go hardcore then removing social apps like Facebook,
Twitter, Instagram, and Pinterest from your phone is a solid way to
kill the source of emotional bankruptcy, relativity bias, and social
comparisons elevated through social media.
Or perhaps simply adjusting your online circle and social feeds to
less showy people and stuff can boost your relative happiness (and
hopefully decrease FOMO) since your source of comparison is gone.
By simply avoiding those who are showing off you might feel better
while you are on social media.

SOCIAL MEDIA AND FEELING FOMO
THE IMPORTANCE OF
ACKNOWLEDGING SOCIAL
MEDIA REALITIES
It’s important to acknowledge that
social media is not a reflection of
reality. The heavily curated images
and messages we see online are
often far from the truth, and it is
unrealistic to compare our lives to
others on social media.
What we are seeing in a few seconds may
give us the impression that the person we are
seeing has those circumstances all day every
day. We don’t get to see all the hard work that
lies hidden in the background getting that
perfect shot.
We need to realise that what we are seeing
is not the full, realistic picture. It is a moment
frozen in time and well planned to give a
particular impression.

SOCIAL MEDIA AND FEELING FOMO
CAN YOU GIVE IT
24 HOURS?
Before making a purchase online
because of something nice that you
have seen or come across can you
give yourself a full 24 hours to get
over the initial impulse to buy?
By allowing your brain this time to get rid of
the initial comparative urge and influence of
the media you have seen advertising whatever
it is you can avoid a purely emotional
response and engage some of your rational
intellectual thinking.
Give yourself time to think about if you really
need the thing or service. Weigh up if it falls
within your budget or if you can afford it now.
Perhaps you might realise it will take a little
saving up to afford the purchase and you can
then plan and budget better for it.

SOCIAL MEDIA AND FEELING FOMO
DON’T LET SOCIAL MEDIA
OR FOMO DERAIL YOUR
FINANCIAL HABITS
Social media FOMO is a real problem
for many people, and it can be costly.
By limiting the time you spend on social media
and being mindful of who you follow, you can
avoid feeling like you need to keep up with
the Joneses. Remember, social media is not a
reflection of reality, and it’s important to keep
this that before making any quick purchases.
So next time you feel the urge to follow that
link and spend those bucks, consider if you
can maybe just wait a little bit and decide if
you really need that thing tomorrow.

PAWN YOUR
CAR AND
DRIVE IT

PAWN YOUR CAR AND DRIVE IT
WHAT IS A
PAWN-WHILE-YOU-DRIVE
SCHEME
For many years ‘pawn-while-youdrive’
schemes have come into
conflict with the National Credit
Regulator (NCR) who say that these
are not proper pawn transactions
but are actually just cleverly hidden
credit agreements. Most may even be
totally illegal.
A ‘pawn-while-you-drive’ scheme is a type
of loan where a lender (who is probably
not registered as a credit provider) takes
ownership of a customer’s vehicle for the
duration of the loan period.
The lender and customer then enter into a
formal sale agreement. The agreement will
say that the lender is buying the customer’s
vehicle. The customer then leases the car until
the loan amount is repaid.

The customer is required to pay a monthly
"rental fee" towards their car and they get to
still drive around in their car, as long as they
pay the monthly instalment/fee.
The repayment amount very much depends
on whether the arrangement is done over a
short or long time period but can be very high
if it is done over a short term.
The lender will often install a tracking device
to the vehicle to keep an eye on its location
especially if the costumer misses a payment.
Then they will be swift to come and get the
car, wherever it is.
This is where things get tricky. If the customer
fails to repay the loan, the lender gets to keep
the car and the customer loses their asset.

PAWN YOUR CAR AND DRIVE IT
PAWN OR CREDIT
TRANSACTIONS
The National Credit Act (NCA) says that a pawn
transaction as an agreement where one party advances
money (or grants credit) to another, and at the time of
doing so, takes possession of goods as security for the
money advanced or credit granted.
The party that advanced the money or granted the credit is entitled,
on expiry of a defined period, to sell the goods and retain all the
proceeds of the sale in settlement of the consumer’s obligations
under the agreement.
This is what those who offer these ‘pawn while you drive’ deals say
they are doing. They say it is a regular pawn arrangement. This is how
they have been doing business for years.
But the NCR say that all these schemes are not actually pawn
transactions. Instead, they say that these deals are actually hidden
credit agreements. Which, in turn, means they fall subject to the NCA.
They say that these agreements are unlawful and so they are void
because when offering credit, the NCA says you have to conduct
affordability assessments, have to give pre-agreement statements
and quotations, and limits what interest, charges, and fees can be
charged. Also, those who offer credit need to be registered.

PAWN YOUR CAR AND DRIVE IT
DESPERATE
PEOPLE
With the high risk of losing your car,
you might wonder why people are
using these arrangements to access
funds.
Well, these schemes offer consumers who
might not meet the banks’ requirements
(under the NCA) the ability to get a loan by
using their car as security. This is true of most
pawn arrangements. It opens access to quick
cash but comes at significant risk.
The NCR has decided to try turn the screws
on these transactions and protect consumers
by making it harder for those offering this type
of loan (or scam).
The NCR are asking consumers who have been
approached by these schemes to report them
to the NCR, and that those who have already
fallen prey to them should lodge a complaint
with the credit ombud. By doing so, maybe
these consumers can help prevent other
consumers from falling into the same trap.

BREAKING
NEWS

ESKOM’S PRICES
ARE GOING UP
As of April 2023, Eskom will be charging an extra 18.65% on
their rates. So get ready to pay 20% more on your electricity
bill.
In some good news for vulnerable consumers, the National
Energy Regulator of South Africa (Nersa) has approved a
lower electricity tariff increase for low-income households.
Instead of a 18.65% increase they will have a 10% increase.
This means that township residents and those living in rural
areas won’t be hit quite as hard by the price hike.
Still, municipalities will have to pay the full 18.6% tariff increase
on their bulk electricity purchases from Eskom regardless
of what they end up charging their different residents. This
basically forces them to cover some of the cost.

DEBT COUNSELLOR FINED
R10 000 FOR SENDING
FORMS LATE
The National Consumer Tribunal (NCT) has ruled that a
Debt Counsellor at one of SA’s biggest Debt Counselling
practices did not contravene the National Credit Act (NCA)
in all the ways the National Credit Regulator (NCR) said she
had.
The ruling followed a 2018 complaint by the NCR relating to
the Debt Counsellor’s alleged failure to distribute payments
to credit providers and obtain court orders within 60 days.
The NCT pointed out that the Act does not require that the
court matters be resolved within 60 days.
The NCT also found that the Debt Counsellor did not
contravene General Condition 2, which requires that Debt
Counsellors not to delegate their duties to unregistered
persons. The NCR argued that because there were no notes
about the matter other than the official forms (and emails
and PDA records) they did not think the Debt Counsellor did
her job. The NCT were very specific about what documents
the NCA requires are kept on file and ruled in favour of the
Debt Counsellor, namely:

(59.1) Applications for debt review.
(59.2) Copies of documents submitted by consumers.
(59.3) Copies of rejection letters (if applicable).
(59.4) Debt restructuring proposals.
(59.5) Copies of any order made by the Tribunal or the
Court; and
(59.6) Copies of clearance certificates.
They ruled that an absence of notes does not mean the work
was not done and that only the above documents need to
be recorded. The NCT found that the Debt Counsellor did
not contravene General Conditions 5 and 6, which require
Debt Counsellors to act in the best interests of consumers
and inform the NCR of changes in employment.
The Debt Counsellor had not changed her work but had
asked the NCR to update information about which Debt
Counsellor within the Debt Counsellor’s practice was
now primarily handling the consumer’s matters. The NCR
themselves failed to do so. This led to their confusion about
who was doing what.
However, it wasn’t all plain sailing for the Debt Counsellor.
In two consumer’s matters, the Debt Counsellor was found
to have messed up by failing to submit 2 forms (the Form
17.1 and Form 17.2) to all credit bureaus and credit providers
fast enough. The Debt Counsellor conceded that these
were sent late due to administrative errors. This resulted in
a R10 000 fine.

FINCHOICE DEBIT ORDER
CANCELLATIONS
After a meeting between The Debt Counsellors Association
(DCASA) and Finchoice/Homechoice it was confirmed that
Finchoice/Homechoice debit orders cancellations will be
swiftly actioned as long as Finchoice/Homechoice have
already sent their CoB and the Debt Counsellor has sent
(1) a Form 17.2, (2) the Debt Cancellation Form and (3) a
proposal.
Timing is key as Finchoice/Homechoice are unable to stop
the debit run if these forms are submitted to close to when
the debit runs (5 days).
The good news is that, because Finchoice/Homechoice
have up to 10 days to implement the proposal, it was agreed
that as long as they have received the proposal 5 days prior
to the debit order running they will refund the payment
either direct to client or PDA.
DCASA strongly suggest the refund goes to the PDA for
distribution rather than to consumers, who may use the
refund unwisely.

DEBT REVIEW
Each year Debt Counsellors
complete reviews about how credit
providers are cooperating with the
debt review process. In turn, credit
providers complete reviews about
Debt Counsellors. The results are
announced at the Annual Debt
Review Awards.
The Debt Review Awards will be held
in October this year.