Debt counselling, implemented as an alternative to sequestration for indebted consumers, is a ‘disaster’ for many consumers, according to practitioners. Rapport notes that the issue of customers wanting to abandon the debt review process has become more complicated with the Western Cape and Gauteng High Courts at odds on the matter.

Consumers with large debts such as mortgages under debt review approached the courts to get clearance certificates when they realised they would not be able to get clearance certificates for decades while those debts were outstanding. The consumers all approached the court because they were in a better financial position and wanted to return to their original repayment terms.

The Western Cape High Court ruled in November and January that only the National Consumer Tribunal may hear these matters in terms of the National Credit Act. However, the Gauteng High Court (Pretoria) assisted a consumer in a similar matter, saying the High Court had a wide discretion to make such orders. Attorney Nanika Prinsloo says the debt counselling process was never designed for long-term debt. She says debt counsellors should be forced to better educate prospective clients on the need to disclose the costs and implications of entering debt restructuring arrangements for long-term debt.

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