2015-11-03

SARS uses banks to collect debt

Pretoria - Several financial institutions, including banks, have accused the South African Revenue Service (SARS) of not following its own processes when collecting outstanding tax debt; instead using them as its first port of call.
Statistics by the Banking Association of South Africa indicate banks each receive between 4 000 and 8 000 appointments on a monthly basis to collect tax debt on SARS's behalf. This has increased from an average of 150 per month in previous years.
The administrative cost per appointment amounts to R200.
Tax commentators have requested that provisions in the Tax Administration Act, relating to the appointment of third parties to collect tax debt be subjected to judicial oversight, appropriate safeguards against abuse, including the exhaustion of other collection mechanisms first.
In their response document tabled before Parliament, SARS and the National Treasury said the statistics should be seen in the light of the "magnitude of SARS's debt book".
SARS has not accepted the concern about getting a court order before appointing a third-party to collect debt on its behalf.
A SARS spokesperson says the courts have held that the agency requires "extended powers" to recover tax debt in the light of the critical role taxes play in the functioning of society.
"SARS' power to appoint a third party to collect a tax debt, without requiring a court order to do so, is such a power."
Marelize Loftie-Eaton, head of external tax and tax administration risk and compliance at FirstRand, says banks had to create a dedicated department to deal with the huge increase in appointments.
"The teams vary between three and seven people per bank. During January to March, with SARS' collection drive before its financial year end, the number of appointments increases to such an extent that banks need to increase the teams."
Loftie-Eaton, who is also a committee member of the Banking Association's direct tax committee says during this period the number of appointments can increase to 1 600 per day at R200 per appointment.
During December last year and March this year SARS issued around 70 000 appointments and Loftie-Eaton expects it to increase to 90 000 in the same period, starting December.
She notes it is not only banks who receive appointments to act as tax debt collectors. Employers, suppliers, life insurers, are all expected to collect tax debt, but banks get the bulk of the tax collections.
FirstRand received 18 000 appointment requests from January to March this year.
"If we consider our monthly statistics it is clear that SARS is not following its own collection process during the normal collection periods. Banks are definitely the first port of call."
She says there is an increase in the number of appointment for individual taxpayers at the end of the month, which means their debit orders cannot be honoured, including payments on their homes, cars, school fees and even policies.
"SARS collects between 40 percent and 120 percent of salary paid into bank accounts," Loftie-Eaton says.
Piet Nel, head of the School of Applied Tax at the SA Institute of Tax Professionals, says the real problem is that taxpayers are often unaware they have outstanding tax debt.
This is because SARS does not contact the taxpayer before the third-party is appointed to collect the debt.
SARS has undertaken to redraft amendments to the Act to allow for prior notice and opportunities to apply for debt relief based on basic living expenses, or in the case of a business, serious financial hardship.
However, when SARS suspects there is "a risk of dissipation of the assets, taxpayer flight and deregistration of tax debtors that are legal entities no prior notice will be given to the taxpayer.
In a case where no prior notice was given, SARS has undertaken to disclose the reasons to the taxpayer "as required under its constitutional obligations to do so," says the spokesperson.
Nel says SAIT understands the original intention was to use this power for jeopardy and problematic collection cases.
"Our concern now is that it seems to be used in all cases and in some instances as the first port of call. All too often SARS raises an additional assessment, and even where the taxpayer commenced the dispute process, SARS will proceed with the collection process," Nel adds.

http://www.iol.co.za/business/companies/sars-uses-banks-to-collect-debt-1.1939860#.VjkmiRwrJhE

2015-10-21

Draft Debt collectors Amendment Bill published

The Department of Justice and Constitutional Development invites you to comment on the proposed Debt Collectors Amendment Draft Bill.


The Bill marks a departure from the current position in that it seeks to subject attorneys who do debt collection to the jurisdiction of the Council for Debt Collectors in terms of the Debt Collectors Act (No 114 of 1998). 

The Bill seeks to amend the Debt Collectors Act 1998, so as to :
▪ amend and insert certain definitions; to make the Act applicable to attorneys;
▪ make provision for the registration and regulation of debt collectors interns;
▪ provide that the list of registered debt collectors may be submitted to Parliament electronically;
▪ further regulate the processes dealing with improper conduct of debt collectors;
▪ provide for the payment of admission of guilt fines by debt collectors in respect of certain cases of improper conduct;
▪ provide for the appointment of inspectors to assist the Council for Debt Collectors with investigations of complaints against debt collectors;
▪ empower the Council for Debt Collectors to tax or assess any account or statement of costs;
▪ further regulate the administration of trust accounts of debt collectors;
▪ extend the matters in respect of which regulations may be made;
▪ empower the Council for Debt Collectors to delegate certain of its powers and functions;
▪ empower the Council for Debt Collectors to exempt debt collectors from certain requirements of the Act; to require the Rules Board for Courts of Law and the Council for Debt Collectors to make recommendations to the Minister on fees and expenses payable in respect of debt collection.

Please follow the link to the Bill.

2015-10-06

Unclaimed benefits tracing efforts paying off

The efforts by members of the Association for Savings & Investment SA (Asisa) to trace the rightful owners of billions of rands of unclaimed benefits in life assurance policies, and those of the Financial Services Board (FSB) to pressurise retirement funds to do the same are starting to pay off.
This week, Asisa said that between implementing its “Standard on Unclaimed Benefits” for the life assurance industry in June 2013 and June this year, life companies had traced and paid 431 364 policyholders and beneficiaries.
Peter Dempsey, the deputy chief executive of Asisa, says that 757 791 policyholders and beneficiaries must still be traced.
The amounts of money paid out and still unclaimed are not disclosed, because Asisa members are not required to report on the value of the unclaimed benefits. Dempsey says the aim is to encourage the tracing of policyholders and beneficiaries rather than measuring the value of the assets involved.
“The good news is that just over one-third of ‘lost’ policyholders and beneficiaries have already been traced and paid their benefits,” Dempsey says.
He says the Asisa Standard currently applies only to unclaimed long-term assurance benefits. This will change in January next year when it becomes effective for collective investment schemes as well.
He says Asisa is engaging with the FSB on extending the principles contained in the standard to cover unclaimed pension fund benefits.
Rosemary Hunter, the deputy FSB executive in charge of retirement funds, announced that the FSB is to step up its campaign to reduce the massive R20 billion owed to 3.07 million fund members or their dependants in unclaimed retirement fund benefits as well as blocking “charlatans” who are seeking to exploit the situation.
Beneficiaries include “lost” former retirement fund members as well as widows and orphans entitled to the benefits of members who died before retirement.
Measures include:
* Increasing pressure on retirement funds and their administrators to trace beneficiaries;
* The establishment by the FSB over the next two years of a searchable central database, which will include the names of all people who have not claimed their benefits; and
* Issuing FSB guidance notes to the retirement industry on unclaimed benefits.
Dempsey says the total number of policyholders to be traced will always be a moving target, because there will always be policyholders who do not update their contact details and beneficiary details.
He says the reports received from member companies show at least four different tracing initiatives for each missing beneficiary case, including the use of tracing agencies, private investigators, the Department of Home Affairs and credit bureaus.
Assurers are also using social media, especially Facebook and LinkedIn, and approaching professional membership bodies.
GOOD-NEWS STORIES
Some examples of people who have been tracked and benefited from the Asisa campaign are:
* An 81-year-old policyholder, who had forgotten about his investment policy and did not have medical scheme cover, was able to afford a back operation.
* An elderly couple could visit their children whom they had not seen in more than three years due to financial constraints.
* A widower, whose wife died two years earlier, did not know that there was a life cover benefit payable to him. He was left to pay medical bills and raise the couple’s teenage daughter and desperately needed the money.
* The daughter of a deceased policyholder was able to open her own business with the proceeds of a death benefit due to her.
KEEP IN CONTACT
If you do not want benefits owed to you or your beneficiaries to become unclaimed benefit statistics, you must:
* Ensure that you check and regularly update your contact and identification details with your life company, collective investment scheme company and retirement fund.
* Ensure that you name beneficiaries of your life assurance and retirement fund benefits and provide their contact details and identification numbers.
* Make and maintain a list of all your investments, life assurance policies (including funeral policies) and retirement funds, with the name of the company and details of the product, such as policy numbers and retirement fund membership numbers. Tell a trusted relative where the list is kept, or give it to the person you have nominated to be the executor of your estate.
THINK YOU HAVE A CLAIM?
Many people suspect that they may be the beneficiary of a life assurance policy but do not know how to go about making a claim. The Association for Savings and Investment SA (Asisa) says you should do the following:
* If you know the name of the life assurance company that issued the policy, you can simply call the company. The assurer will ask you to provide information that shows that you have a real and legitimate interest in the policy proceeds. The company is required to provide you with feedback within seven working days.
* If you believe that you or a deceased relative may have had an assurance policy (life cover or an investment policy), or you come across an old policy contract in your files but are not sure of the assurer’s details, Asisa may be able to help. On the Asisa website (www.asisa.org.za) click on “Contact” and then scroll down to “Lost Policies”. Download the Lost Policy form, complete it, and either email or fax it to Asisa. This form will be circulated among Asisa’s member companies. The life assurers will check the details against their records and if there is an existing policy, you will hear from the company within seven days.
The company will, however, need to ensure that you have a valid interest in the policy.

https://www.blogger.com/blogger.g?blogID=842166282251750296#editor/src=dashboard

ANC's Mchunu says SA is drowning in debt



Durban – KwaZulu-Natal ANC chairperson Senzo Mchunu on Saturday said South Africans were getting deeper and deeper into debt.
Speaking at the two day Provincial General Council at Coastlands Hotel in South Beach, Mchunu said going into next week’s National General Council, the party would focus on policies affecting both the employed and the unemployed.
“Our policy making, implementation and review by nature should always be founded on socio-economic conditions that we see prevailing out there and affecting our people in different ways, this includes the employed and the unemployed,” he said.
He said while the government focused more on the country’s high unemployment rate, there were challenges affecting the employed.
“In December 2014, a report by the Credit Consumer Monitor stated that South Africans are over-burdened by debt. We are increasingly drowning in debt including those that are employed.
“At the time records showed that out of 22.84 million credit active consumers, 10 million have an impaired credit record.”
Garnishee orders
This means that 10 million people have received judgements and bad credit records, said Mchunu.
“The Public Service Commission in 2008 released information that public servants such policeman, nurses and teachers were the ones who were drowning in debt.
“Money collected from public servants was about R1.1bn in 2006 and 2007. If public servants were owing this much alone and they were employed, then you realise that there is a problem.”
Mchunu said government officials on salary levels 6, 7 and 8, were the ones who were served with garnishee orders the most.
“In the 2014-2015 financial year, money collected from employed people by government in KZN alone was R188m.
“The issue that affects policy here is garnishee orders. We need to look at all the laws and regulations pertaining to that policy.”
Help
Mchunu said the government needed to help people in debt.
“There are many areas we need to look at like how the courts apply the law when it comes to garnishee orders.
“Some people get garnishee orders even when they haven’t appeared in court. Sometimes money is taken without your permission, sometimes you are overcharged, sometimes there is duplication and other times once you have paid off the debt, they continue to charge you.
“There are many things that lead to employed people getting deeper and deeper into debt even when they are employed, especially public servants.
“We need to look at whether we have adequate policy, laws and regulations that seek to cover these people, especially public servants, if we are to protect them against what may seem to be unfair policy on garnishing orders.
“We need to look at every section of society that is affected by policy especially those that we take for granted that they are well-off,” said Mchunu.

http://www.news24.com/SouthAfrica/News/ANCs-Mchunu-says-SA-is-drowning-in-debt-20151003

'Impaired credit at record high'

Lethabong – The number of South Africans with impaired credit records has reached its highest ever levels, SA Communist Party general secretary Blade Nzimande said on Sunday.
“The National Credit Regulator has just released a report that South Africa has reached its highest levels ever in terms of people with impaired credit records. All because of the drive to make profits at any cost by finance and financial institutions, including through reckless lending,” he said at the launch of the SACP’s Red October campaign at Lethabong, near Rustenburg in North West.
This year’s campaign focuses on transformation of the financial sector and the media.
“It is estimated that there are 19 million credit active South Africans who have such impaired credit records. More than 11 million were categorised as over-indebted.
“The loans and high interest rates that millions of our people owe means that they are more working to pay banks and micro lenders, than to look after themselves, their families, and meet their basic needs,” he said.
The SACP was not opposed to credit for productive use and investment.
“What we are opposed to is reckless lending practices that result in indebtedness and over-indebtedness for nothing but consumerist spending.”
It was estimated that around 10 000 homes a year were being repossessed by the banks.
“This level of eviction can only be comparable to apartheid-era group areas removals. The homes are then sold at auction, very often at a fraction of their market value. The worst case scenario involved a house sold at R10, and a house taken away for nothing but corruption involving the concoction of title deeds; the owner was dispossessed and jailed for a while. All this is inhuman,” Nzimande said.
The SACP would raise with the National Treasury the whole processes relating to bank repossession of people’s houses with a view to instituting an investigation.
“The SACP is calling for corrective regulatory and legislative steps to build a humane system of handling these matters in a way that puts people first.”
The SACP would also ask Chief Justice Mogoeng Mogoeng to institute an investigation into the whole process of authorisation of house repossessions.
The Red October financial sector campaign was pushing for a new financial sector structure, he said.
“We are pushing for a financial sector and banks which will serve the people. We are pushing for an end to private monopoly domination of the banking sector. We are calling for diversity, for a greater enabling environment for the development of workers and people’s co-operative banks.”
Government had done relatively well in terms of investment in infrastructure by investing a trillion rand over five years.
“This has helped somewhat in cushioning our country from the worst of the impact of the global capitalist crisis that erupted in 2008,” he said.
“The SACP is, however, concerned that not enough resources in the private capitalist financial sector is going into investment into infrastructure, manufacturing, SMEs or co-operatives. Instead, too much of its resources are going into financing shopping malls and consumption.”
He said financing for industrialisation and infrastructure, SMEs, and co-operatives would be at the centre of the campaign.
“Such financing will play a big role in creating the much-needed jobs in our country.”
The SACP’s financial sector campaign 15 years ago, in 2000, had gained victories.
“We won a whole raft of legislative measures, including the establishment of the National Credit Regulator, the Co-operative Banks Act, and the regulation of the conduct and activities of credit bureaux,” Nzimande said. – African News Agency (ANA)

http://www.iol.co.za/business/news/impaired-credit-at-record-high-1.1924764#.VhN5cC4rJhE

2015-09-24

Significant number of ‘lost’ policyholders and beneficiaries traced

22 SEPTEMBER 2015
"Life insurers have reunited 431 364 policyholders and beneficiaries with their unclaimed benefits since the implementation in June 2013 of the ASISA Standard on Unclaimed Assets"
Life insurers have reunited 431 364 policyholders and beneficiaries with their unclaimed benefits since the implementation in June 2013 of the ASISA Standard on Unclaimed Assets.
The Association for Savings and Investment South Africa (ASISA) this week released updated statistics on the tracing activities of its long-term insurance members to the end of June 2015 aimed at locating policyholders and beneficiaries who have unclaimed assets due to them.
Peter Dempsey, deputy CEO of ASISA, says in total some 757 791 policyholders and beneficiaries must still be traced.
“The good news is that just over one third of ‘lost’ policyholders and beneficiaries have already been traced and paid their benefits,” says Dempsey.
He explains, however, that the total number of policyholders to be traced will always be a moving target. “There will always be policyholders who do not update their contact details and beneficiary details. Our Standard on Unclaimed Assets requires life insurers to start the process of tracing policyholders or beneficiaries within six months of the assets becoming payable.”

Policyholders/beneficiaries traced
Policyholders/beneficiaries not yet located
Within 6 months of benefit becoming payable
159 183
119 595
Within 3 years of benefit bec Policyholders/beneficiaries traced Policyholders/beneficiaries not yet located Within 6 months of benefit becoming payable 159 183 119 595 Within 3 years of benefit becoming payable 165 004 331 084 Within 10 years of benefit becoming payable 107 177 307 112 TOTAL (as at 30 June 2015) 431 364 757 791oming payable
165 004
331 084
Within 10 years of benefit becoming payable
107 177
307 112
TOTAL (as at 30 June 2015)
431 364
757 791

Dempsey notes that currently the majority of policyholders and beneficiaries not yet traced fall into the three-year category. The same is true for the number of policyholders and beneficiaries already traced.
“This indicates that the tracing efforts of life insurers are paying off. With time, however, we expect the majority of tracing efforts to reflect in the six months category.”
The Standard on Unclaimed Assets requires that life insurers with ASISA membership intensify the level of tracing policyholders or beneficiaries in order to minimise the pool of assets that remains unclaimed.
Dempsey says the reports received from member companies show at least four different tracing initiatives per case, including the use of tracing agencies, private investigators, the Department of Home Affairs and credit bureaus.
He adds that members continue to apply a number of innovative tracing methods, including the use of social media, especially Facebook and LinkedIn, and approaching professional membership bodies.
Dempsey says for some people traced the financial windfall came at a time of great need.
One life insurer traced an 81-year-old policyholder who had forgotten about his investment policy. The grateful policyholder told the insurer that the benefit could not have come at a better time since he required a back operation and did not have medical aid cover.
For an elderly couple the unexpected benefit payment meant that they could visit their children whom they had not seen in more than three years due to financial constraints. 
Another client, whose wife died two years earlier, did not know that there was a life cover benefit payable to him. He was left to pay medical bills and raise the couple’s teenage daughter and desperately needed the money.
Another insurer reported that the daughter of a deceased policyholder was able to open her own business after she was traced and paid the death benefit due to her.
Dempsey says the ASISA Standard on Unclaimed Assets exempts unclaimed assets from the Prescription Act, which provides for a three-year period within which a debt must be collected. This means that life insurers who are ASISA members are committed to holding and growing unclaimed policy benefits until the rightful owner is found, no matter how long it takes.
He says while the current Standard only applies to unclaimed long-term insurance benefits, this will change in January next year when the Standard becomes effective for Collective Investment Scheme (CIS) assets as well. ASISA is engaging with the Financial Services Board (FSB) on extending the principles contained in the Standard to cover unclaimed pension fund benefits.

http://asisa.org.za/en/media-release/303-significant-number-of-lost-policyholders-and-beneficiaries-traced

Billions in insurance benefits unclaimed

Life insurance companies have, over the past two years, managed to find 431 364 policyholders and beneficiaries due payouts from life policies and investments, according to the Association for Savings and Investment South Africa (Asisa).

Asisa this week released statistics on the tracing activities of its long-term insurance members – which collectively manage more than R2 trillion in assets – to the end of June 2015.
Clear guidelines
This follows the implementation in June 2013 of the Asisa Standard on Unclaimed Assets, which provides clear guidelines aimed at improving the industry’s efforts to locate policyholders and beneficiaries who have unclaimed assets due to them.
“Just over one third of ‘lost’ policyholders and beneficiaries have already been traced and paid their benefits,” said Peter Dempsey, deputy CEO of Asisa. About 757 791 policyholders and beneficiaries must still be traced, said Dempsey.
The Standard requires that members of Asisa intensify their tracing efforts, which should begin within six months of assets becoming payable, in order to minimise unclaimed assets. Member companies reported the use of at least four different tracing initiatives per case, according to Dempsey, including the use of tracing agencies, private investigators, the Department of Home Affairs and credit bureaus. In some cases, Facebook and LinkedIn were used.
“For some people traced the financial windfall came at a time of great need,” Dempsey noted. One life insurer traced an 81-year-old policyholder who required a back operation, but did not have medical aid cover.
“Another client, whose wife died two years earlier, did not know that there was a life cover benefit payable to him. He was left to pay medical bills and raise the couple’s teenage daughter and desperately needed the money,” said Dempsey.
In terms of the Standard, life insurers that are members of Asisa commit to holding and growing unclaimed policy benefits until the rightful owner is found, no matter how long that takes. This money must be invested in line with the expectation created by the original risk or investment policy.
Unclaimed assets are exempt from the Prescription Act, which provides for a three-year period within which a right must be enforced. As of January 2016, the Standard will apply to Collective Investment Scheme (CIS) assets too.
http://citizen.co.za/784726/billions-in-insurance-benefits-unclaimed/

2015-09-23

Life insurers pay 430,000 unclaimed benefits in two years

JOHANNESBURG – Life insurance companies have, over the past two years, managed to find 431 364 policyholders and beneficiaries due pay-outs from life policies and investments, according to the Association for Savings and Investment South Africa (Asisa).
Asisa on Tuesday released statistics on the tracing activities of its long-term insurance members – which collectively manage more than R2 trillion in assets – to the end of June 2015.
This follows the implementation in June 2013 of the Asisa Standard on Unclaimed Assets, which provides clear guidelines aimed at improving the industry’s efforts to locate policyholders and beneficiaries who have unclaimed assets due to them.
“Just over one third of ‘lost’ policyholders and beneficiaries have already been traced and paid their benefits,” commented Peter Dempsey, deputy CEO of Asisa.
Some 757 791 policyholders and beneficiaries must still be traced, said Dempsey.
“There will always be policyholders who do not update their contact details and beneficiary details,” he said. 
The Standard requires that members of Asisa intensify their tracing efforts, which should begin within six months of assets becoming payable, in order to minimise unclaimed assets.
Member companies reported the use of at least four different tracing initiatives per case, according to Dempsey, including the use of tracing agencies, private investigators, the Department of Home Affairs and credit bureaus.
In some cases, Facebook and LinkedIn were used to trace beneficiaries.
“For some people traced the financial windfall came at a time of great need,” Dempsey noted.
For example, one life insurer traced an 81-year-old policyholder who had forgotten about his investment policy and required a back operation, but did not have medical aid cover.
“Another client, whose wife died two years earlier, did not know that there was a life cover benefit payable to him. He was left to pay medical bills and raise the couple’s teenage daughter and desperately needed the money,” said Dempsey.
In terms of the Standard, life insurers that are members of Asisa commit to holding and growing unclaimed policy benefits until the rightful owner is found, no matter how long that takes. This money must be invested in line with the expectation created by the original risk or investment policy contract and cannot simply be shoved into a cash holding, for example.
Unclaimed assets are exempt from the Prescription Act, which provides for a three-year period within which a debt must be collected.
As of January 2016, the Standard will apply to Collective Investment Scheme (CIS) assets too.
Asisa is engaging with the Financial Services Board (FSB) on extending the principles contained in the Standard to cover unclaimed pension fund benefits, Dempsey said.
According to the latest annual report of the Registrar of Pension Funds, the total value of unclaimed retirement benefits rose to around R20 billion owed to roughly 3.5 million beneficiaries in 2014.
The roughly 50 active and registered unclaimed benefit funds, have an estimated R4.6 billion owed to around 792 000 beneficiaries, according to the deputy registrar of pension funds at the FSB, Rosemary Hunter.
http://www.moneyweb.co.za/news/industry/life-insurers-pay-430-000-unclaimed-benefits-in-two-years/

When employers become debt collectors …

Think twice about giving your employer the right to deduct money from your salary for the repayment of debt – in other words, giving your employer permission to pay one of your creditors before paying you your salary. I’m not talking about an emoluments attachment order (EAO), which is a court order compelling your employer to deduct from your salary money you owe a creditor who has obtained default judgment against you. I’m talking about you choosing to have your salary docked – by your payroll department – to pay a creditor. It seems a crazy thing to do, but apparently it’s not uncommon, particularly among state employees.
“Approximately 30 percent of First National Bank’s affordable housing book comes from payroll deductions,” Lee Mhlongo, the chief executive of housing finance at FNB, writes in a blog post on the bank’s website.
“Arranging a payroll deduction simplifies one’s life, as you do not have to agonise about the debit order coming off the account. Instalments are paid directly by the employer to the service provider (the bank) on behalf of the employee. The employer then pays the balance of the salary to the employee/client’s account.”
Making use of a payroll deduction to service a home loan has benefits, Mhlongo says, including a better risk profile with the bank, owing to there being less chance of default.
That may be so, but getting your payroll department to stop a monthly deduction from your salary can be a nightmare.
confused hr department
A Gauteng consumer who was paying her Standard Bank bond instalment via a payroll deduction became over-indebted and went into debt review. As soon as she was under debt review, she instructed her employer, the Gauteng treasury, to stop paying Standard Bank. (When you go into debt counselling, your debt counsellor will stop payments to all credit providers in order for them to be paid via the debt review process.) But the instruction was not followed, and the consumer’s employer continued to pay her home loan instalments to Standard Bank. When the consumer challenged this, her employer asked her to obtain a letter from Standard Bank issuing the instruction to cancel payment. But since the instruction to pay the creditor via payroll deduction did not originate with Standard Bank, it refused to issue a letter.
And it happened again. When the consumer’s debt counsellor warned the employer that its failure to carry out the employee’s instruction was placing her in danger of defaulting on her debt review, the employer asked for proof that the consumer was under “debt administration” – something quite different to debt counselling.
The debt counsellor pushed back, asking that since the deduction from the payroll was not court ordered, nor instigated by Standard Bank, but by the employee herself, what gave Persal (the government’s personnel salary system) the right to refuse to take the written instruction of the employee? “Be that as it may, please find attached documentation which confirms that the consumer has applied for debt review,” the debt counsellor said.
The employer’s response is telling: “The staff in human resources are just trying to ensure that they are covered should there be any repercussions from any financial institution.”
As the debt counsellor says, the employer’s over-zealous endeavour to protect itself put the employee at risk.
It took the consumer and the debt counsellor three months to get the employer to stop paying Standard Bank.
“It raises the question of whose interests are being served: the consumer’s or the credit provider’s?” consumer acitivist Simon Lapping says.
HUGE DEDUCTION
A Port Shepstone traffic officer, who had an existing loan from a microlender, obtained a R5 000 payday loan from the same lender. She was repaying her loans via payroll deduction. When she went under debt review, the microlender managed to get her employer to deduct R9 000 of her salary in one fell swoop – almost half of her gross income.
“It’s equivalent to the government doing debt collecting against its own employees,” Lapping says.
What these consumers have experienced also reveals ignorance on the part of payroll staff. Clearly, they don’t understand how debt review works.
There’s a lot of misinformation being disseminated about debt counselling, and some of the biggest offenders are microlenders.
The following is published on microlender Boodle’s website as an answer to the question “What is debt review?”:
“We are a responsible lender and will also not even consider giving you Boodle if you are already debt stressed. We also take fraud very serious [sic] and if you abuse our goodwill and apply for administration and debt review after we have given you Boodle we will be very disappointed and may even open a case of fraud with the South African Police Services. If you are in fact debt stressed we suggest you seek counselling and approach a debt counsellor to assist you.”
I get that Boodle is trying to dissuade “debt-stressed” consumers from acquiring credit with the intention of then going under debt review. But consumers who are debt-stressed wouldn’t be able to get credit if credit providers did proper affordability assessments, which they are legally obliged to do. Their failure to properly assess affordability is what the National Credit Act defines as “reckless lending” and there’s no excuse for it.
Lapping says Boodle is also seeking to discourage consumers from applying for debt review – by threatening them that they will be sued for fraud. He has lodged a complaint with the National Credit Regulator (NCR).
Early this year, the NCR referred to the National Consumer Tribunal a case of reckless lending against Boodle. Lesiba Mashapa, the company secretary at the NCR, says the case was settled, with Boodle agreeing to pay an administrative fine of R500 000 and write off the loans.

http://www.iol.co.za/business/personal-finance/columnists/when-employers-become-debt-collectors-1.1921283#.VhOaRC4rJhE

2015-09-14

Debt Collection Plays An Important Role in the Economy

The trade association I represent, DBA International and its 575 member companies, play a critical role in keeping America’s economy moving forward. We purchase and collect defaulted receivables. It’s important to note that only a small fraction of consumers wind up defaulting on debt and an even smaller percentage wind up in court. While efforts to collect this defaulted debt may be an unpleasant topic of conversation, attempts to do so are nevertheless important to all of us.
America’s economy has been chugging along and the recent improvement in the unemployment rate is certainly welcome news. When America’s economy works efficiently, consumers are able to access and use credit to purchase goods and services. America has a credit-based economy and, when used responsibly, it works well for families, farmers and small businesses. Whether it’s a family taking out a loan to buy a home, a farmer borrowing money to purchase equipment, or a small business using a credit card to acquire a new printer, access to affordable credit is what makes America’s economic engine hum.
It is also important that consumers, farmers and small businesses repay their debts. The system falters when consumers default on loans. We all suffer when those who use credit fail to live up to their obligations. When this occurs, the costs to borrow increase and prices rise because businesses that provided goods and services have to recoup money lost due to default. Access to credit is then greatly reduced.
As typically occurs, actions by unscrupulous debt collectors make headlines – unfortunately there are “bad apples” in every profession. Reacting to these stories, legislators often look for a “quick fix” and reporters attempt to target the entire debt collection industry and paint it with broad, unflattering brush-strokes.
One recent example of a “quick fix” in the California State Legislature is the Economic Equity and Financial Stability Initiative, a three-bill package introduced by a former bankruptcy attorney, purporting to reform California’s bankruptcy and debt collection laws to help low-income families get back on their feet. These bills would have unintended and negative consequences for California consumers.
While SB 641 claims to provide low-income consumers with legal recourse to set aside a default judgment, what it effectively does is require companies who successfully obtained a judgment in court to reproduce evidence already provided for up to six years from the date of judgment—well beyond any legal requirements for document retention. The issue the bill attempts to address is ensuring the debtor receives proper notification of a lawsuit filed against them—which represents only one percent of all complaints received by the Consumer Financial Protection Bureau. The stated problem involves the process serving profession, yet the bill focuses only on judgments obtained by debt purchasers.
By raising the homestead exemption, SB 308 would allow wealthy donors to shield assets prior to filing for bankruptcy and then walk away with hundreds of thousands of dollars of unrestricted cash. Likewise, the wage garnishment restrictions outlined in SB 501 favor higher income debtors and may unduly penalize low-income wage-earners with assessment fees multiplied by the extension of repayment terms. The imbalance these bills create will be detrimental to the vast majority of consumers who are fiscally responsible.
Equally true, various columnists and reporters writing for publications in California and nationwide frequently paint inaccurate, misleading pictures of the debt collection industry. Efforts to scapegoat an entire industry by focusing on the unfortunate actions of one entity usually ring hollow. It is often forgotten or conveniently ignored that the debt buying industry is already heavily regulated by multiple government entities at the federal and state level – with more regulations being proposed all the time. Equally true, DBA International member companies have instituted an industry-leading Receivables Management Certification Program that exceeds state and federal regulation.
The responsible use of credit is an integral part of a fully functioning economic system. While the collection of debt is an unpleasant subject, it is nevertheless critical in a credit-based economy. On behalf of DBA International’s member companies – who collect debt professionally and ethically, comply with a bevy of federal and state regulations and interact with consumers in a transparent manner – we understand the desire for the legislative “quick fix” and the desire by some to create “bad guys.” Hopefully cooler heads will prevail. Decision-makers will realize that such “easy solutions” usually have unintended consequences and efforts to demonize an entire industry don’t pass the sniff test.
Jan Stieger is the executive director of Sacramento-based DBA International.

2015-09-06

South Africa: Govt Acts On Garnishee 'Abuse' in Public Sector

The government has appointed a company to investigate the abuse of emolument attachment orders, also known as garnishee orders, in the public services sector.
Q Link Holdings was appointed on Tuesday to "investigate the extent and abuse of EAOs in the public service".
Public servants are some of the most heavily indebted in South Africa, accounting for about 40 percent or more of unsecured debt.
Q Link executive chairperson Clark Gardner told Fin24 that the company will manage all existing garnishee orders and will receive all new ones.
The company will capture the orders and access the Government payroll to 'execute' on the deduction and the payment to collectors, Gardner said.
"Irregularities and past over-deductions will be challenged in the appropriate court to rescind on a case by case or class action basis and criminally prosecuted if appropriate," he said.

In July Judge Siraj Desai ruled that garnishee orders against 15 consumers were "unconstitutional" and "an assault on human dignity" in a landmark case.
The class action was brought by the Stellenbosch's Legal Aid Clinic against a group of credit providers and Flemix & Associates, a law firm that facilitates the salary deductions.
In December 2013 cabinet authorised the ministers of finance and trade and industry to take measures to assist the over-indebted.
This led to a call by Finance Minister Nhlanhla Nene for tenders to find a service provider to undertake an investigation into the extent and abuse of garnishee orders in the public sector.
Source: Fin24
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