Sometimes debt counsellors can easily be mistaken for debt collectors and vice versa. However, a debt counsellor and debt collector have two very different agendas and roles to play in the South African credit industry.  Let’s look at the main differences between these two parties when it comes to consumer debt.

What Does A Debt Collector Do?

A debt collector or collection agency, and sometimes even lawyers or law firms are responsible for collecting consumers’ delinquent debts. There are also some agencies that purchase uncollected debt directly from credit providers. This is due to the credit providers weighing in costs to collect the outstanding balance. Many credit providers will rather sell the outstanding balance at a reduced rate to the collection agencies. These agencies are usually large call centre operations with agents that are highly incentivized to bring in debt repayments. 

Why Would A Debt Collector Contact You?

Generally, a debt collection agency will contact you if you have any unpaid debts, if your account is in arrears, accounts that have been handed-over or if there is any legal action on your accounts. Moreover, the collection agency will try to get the consumer to make any payments on the overdue debt. Usually, they attempt to contact consumers via SMS, call, email or even WhatsApp.

What Should You Do If A Debt Collector Is Contacting You? 

Most importantly, when a debt collection agency is contacting you, it’s crucial that you understand the debt that you owe and the total amount. In addition, try to figure out how you can possibly make payments on the overdue debt. The longer you take to settle the debt, it can start ruining your credit score and hinder your ability to obtain credit in the future as well as apply for vehicle and asset financing. Missing debt repayments can also cause your debt to grow due to interest, fees and penalties. 

What Does A Debt Counsellor Do?

A debt counsellor can provide debt counselling as a  rehabilitation option for over-indebted consumers.  Debt counselling aims to reduce monthly instalments and interest rates. With the reduction in instalments and interest rates, consumers are able to have one affordable monthly instalment for all of their debt. This reduces the stress of having multiple monthly instalments. Each debt counsellor acts under the legal framework of the National Credit Act (NCA) of South Africa and should be registered with the National Credit Regulator (NCR). 

Why Would A Debt Counsellor Contact You?

Some debt counsellors cold call consumers, however, debt counselling is a voluntary solution where a consumer should opt-in for assistance regarding their debt. A debt counsellor can negotiate with your credit providers to reduce your monthly instalments and interest rates to a more affordable and manageable level. Due to the reduced instalments and interest rates, you are able to save money each month. You can choose any debt counsellor to assist you with the process, but try to do your research and choose a registered company with credibility and good service. 

What To Do If A Debt Counsellor Is Contacting You? 

In the case of a debt counsellor contacting you, here’s what you could do:

1. If you are struggling with debt, find out how they could possibly assist you in lowering your payments, how they would do it and what the average interest rate on your accounts would be.
2. Ensure that they are a registered debt counsellor. It’s important that you check that they are registered with the NCR. 
3. Check their reviews on various websites as this can give you insight from other consumers/clients. 

These tips can assist you in choosing the right debt counsellor and the benefits they may offer you.