Debt counsellor fined R250 000 for misleading consumers during debt review
A debt counsellor has been fined R250 000 by the National Consumer Tribunal after placing a consumer under debt review without proper disclosure or written consent.
The move prevented the consumer from accessing new credit. Debt review is intended for those who are over-indebted, restructuring debt and protecting them from legal action. However, it also flags a credit profile and blocks new credit until a court clears the review status.
Some debt counsellors use marketing – often cold calls – to sign consumers up for debt review without explaining its implications, says MJ Davis, chief executive officer of retail loans at FNB.
'This case is a stark reminder of how easily consumers can be misled into a process that fundamentally alters their financial freedom,' Davis said. 'Debt review is a serious legal commitment. When entered without full understanding or consent, it can have devastating consequences, especially for vulnerable consumers who are already under financial pressure.'
Debt review may be the right choice for some, but debt consolidation can be a less severe alternative, combining multiple debts into one personal loan with lower interest rates, no legal restrictions on future credit and no credit bureau flag.
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