Debt counselling is a process whereby a debt counsellor negotiates with credit providers on behalf of consumers. Over-indebted consumers approach debt counsellors to make their debt more affordable for them. A debt counsellor works as the middle-man between the consumer and their credit providers. The debt counsellor obtains the power of attorney to negotiate on all the consumers credit agreements. The debt counselling process is a complicated manner and there are quite a few systems and processes that can be used by debt counsellors. Today we have a look at the Debt Counselling Rule System (more commonly known as DCRS) process.
What Is The Aim Of Debt Counselling?
A debt counsellors primary goal is to help their clients by making their debts more affordable and to settle them as soon as possible. The debt counsellor achieves this by formally negotiating with each and every credit provider. The consumers debt repayments are reduced due to the term of the debt being extended. This may seem counterintuitive to the goal of the process, however it’s necessary in order to drop the monthly repayments which the consumer cannot afford.
DCRS vs Manual Proposals
There are two main methods of formal negotiations – using DCRS or sending manual proposals. Each credit provider will receive a proposal. A counter-offers is returned if the proposal gets rejected. Manual negotiations involve the debt counsellor manually calculating the new terms of the loans. DCRS aims to rectify the inconsistencies common to the debt counselling process.
According to CIRCULAR 1 OF 2017 – DEBT COUNSELLING RULES SYSTEM
The DCRS is a set of standard rules agreed upon by the industry that provide voluntary concessions by exclusion of certain charges, adjusting the contractual fees, interest rates and repayment terms on credit agreements that are restructured under debt counselling. The objective of the DCRS is to enable the smooth negotiation and acceptance, thus improving the solve rate of proposals whilst addressing inconsistencies in debt review.
DCRS is an approved, automated calculation that the credit providers are mandated to accept. DCRS proposals should be accepted on the first go, in theory. Manual negotiations can go back and fourth a few times until agreement is reached.
What Are The Benefits Of DCRS?
- The process is simpler, as proposals should be standardised
- Proposals should reaccepted by all parties in the process
- Reduced interest rates (often as low as 0%)
- Decreased service fees
- Lower monthly instalments
Once the negotiations have been finalised and proposals have been accepted by both parties, the new agreements are ratified at the NCT or a magistrates court.
If you are unsure about the debt counselling process and how to choose a debt counsellor, do your homework first. Make sure you ask your debt counsellor the correct questions – Are they registered with the NCR? Do they use DCRS? Are their fees in line with the official fee guidelines?