DEBT COUNSELLING: Debt Counselling Not Enough to Keep Consumers Out Of Debt
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Debt counselling alone is not enough to keep consumers out of debt. “It is a short-term fix, consumers need holistic help to learn how to manage money, stay out of debt and plan for the future,” Andre Snyman, head of South Africa’s largest debt counselling company said.
Snyman was speaking at the launch in Pretoria of Consumer Assist’s debt counselling and financial wellness franchise. “After two years in this business and dealing with hundreds of consumers nationwide we began realising that we were dealing with a symptom and not the problem,” Snyman said.
“Those who get into serious debt are most often people with good jobs, they are respected members of their community but they simply don’t know how to manage money, they don’t budget, they don’t negotiate better terms for policies or investments and they usually don’t have a will. In many ways they are blind consumers, they have money and credit agreements but scant financial savvy.
“We realised we needed to create a solution that prevented those not yet in serious debt from going down that ruinous road and to help those in trouble to build a confident future with sound money management principles. At the end of debt review, they no longer have a debt counsellor helping them, they are on their own and some begin floundering again. We need to give consumers the capacity to make careful financial decisions that build wealth.”
According to the National Credit Regulator more than 8m consumers are debt stressed, more than 180 000 consumers are under debt review with debt counsellors and that figure is growing at around 10 000 a month. “Your average person in serious debt has two cars, a house, four to 10 credit cards and one bank account. In addition to debt counselling if they need it, or if they do not need it but want to manage money better, we will offer a range of additional services and products,“ Snyman said.
Consumer Assist already offers telephonic counselling by psycho-social workers to the over-indebted and they offer credit life assurance that cuts existing agreements by up to 30%. Credit life agreements ensure that if a person loses their job, dies or becomes very ill their debt is paid up; most creditors demand this be added to loans, hire purchase or credit agreements.
In two real instances a woman had nine creditors including three credit cards, she was paying a premium of R644 per month on R255 645 debt, Consumer Assist was able to reduce the premium to R255,65 a month, a saving of R388,35 a month or R4 660,20 a year.
In the second case, another woman had R343 717 debt and seven creditors. She was paying R1 877 in premiums, Consumer Assist was able to ensure this dropped to R343,72 a month – a saving of R1 533,28 a month or R18 399,36 a year. This savings is then used to repay debt.
“The franchise offers other services ranging from legal to financial literacy, assistance with budgeting and money management among others.”
Snyman said the Consumer Assist franchise model is a global first. Consumer Assist franchises use existing branches with rent and staff costs covered by Consumer Assist as well as backroom administration and marketing including Consumer Assist’s state-of-the-art technology. “The cost is a very low R120 000 and FNB will would grant 50% loans to the right franchisees. We have received many enquiries and are now going through a painstaking process of selecting the right people, they need financial and sales ability as well as empathy.
“What we have learnt as a debt counselling and financial wellness company with thousands of people on our books, is that if consumers are not taught how to budget, read the fine print in contracts, save and negotiate better rates while getting optimum service they don’t learn how to stay out of debt and build wealth.
“Globally last year, according to the World Bank, 35m people lost jobs and millions had major assets such as their homes repossessed but we know of no other country that has created the sort of model we have to help people get back on their feet. And to help the financially stable enhance their money management skills.”
Consumer Assist and is promising projected returns on investment within 15 months instead of the usual three years.
“We are predicting a rapid return on investment based on how fast debt counselling and financial wellness programmes have grown, both are now multi-billion rand industries,” Snyman said.
He said that the financial wellness industry to corporates had grown dramatically in recent years because of active government incentives, “we have a significant footprint in this industry with close to 30 major blue-chip clients ranging from big banks to major retailers, but 75% of the population are employed by small and medium enterprises that can’t afford financial wellness courses. There has to be a way that those consumers can access the benefits of those courses in an affordable, time-effective way and that is what we will also provide.”
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