What debt review actually is
Debt review — the term the National Credit Act uses; “debt counselling” is the everyday name — is the statutory escape hatch for a consumer who has borrowed more than they can repay. It lives in Part D of Chapter 4 of the National Credit Act 34 of 2005 (sections 78 to 88). The idea is simple: instead of being sued by each creditor in turn, an over-indebted person hands their finances to a registered debt counsellor, who works out one affordable monthly payment that is distributed across all the creditors over a longer period at reduced instalments — and, while that process runs, the creditors are held back from enforcing.
Two boundaries define the remedy from the outset. First, debt review is for natural persons only — this Part of the Act does not reach juristic persons, so a company in distress uses business rescue, not debt review:
This Part does not apply to a credit agreement in respect of which the consumer is a juristic person.
Second, debt review reaches only regulated credit agreements: it is a creature of the NCA, so if the Act does not apply to an agreement, that debt cannot be brought into review at all. That is why the first question in any debt-review analysis is not “is this person over-indebted?” but “does the National Credit Act even apply?”
First question: does the National Credit Act apply?
Debt review, reckless-credit relief and the in duplum cap all bite only on agreements the NCA regulates. So before any of the machinery in this guide is available, the debt must be a credit agreement to which the Act applies. The Supreme Court of Appeal’s recent decision in The Profit Hub (Pty) Ltd v Zuwon Consultants (Pty) Ltd is the leading statement of how a court answers that gateway question: by the agreement’s substance, not its label.
The Act also withdraws itself from certain consumers and certain large deals. It does not apply where the consumer is a juristic person at or above the R1 000 000 asset-value or annual-turnover threshold (s 4(1)(a)(i)), and a large agreement — a mortgage, or a credit transaction with principal debt at or above R250 000 — with a smaller juristic person is excluded too (s 4(1)(b) read with s 9(4)). These thresholds are set in the Determination of Thresholds (GN 713, GG 28893, 1 June 2006) and remain unchanged. For a flesh-and-blood consumer none of that bars the Act — but it is the reason a business owner who signed a large commercial loan cannot reach for debt review on that loan. The full analysis is in NCA thresholds for juristic persons.
Who qualifies: the section 79 over-indebtedness test
Debt review is for the consumer who is over-indebted. The Act defines that not by a rand figure but by a forward-looking, evidence-weighed test: can this person, on the balance of what is known, keep up with everything they owe?
A consumer is over-indebted if the preponderance of available information at the time a determination is made indicates that the particular consumer is or will be unable to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, having regard to that consumer’s— (a) financial means, prospects and obligations; and (b) probable propensity to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, as indicated by the consumer’s history of debt repayment.
Three features of this test matter in practice. It looks at the consumer’s position as a whole — all credit agreements, not one defaulted account. It is forward-looking (“is or will be unable”), so a person can qualify before they have actually missed a payment. And it turns on the “preponderance of available information”, which is why a proper debt counsellor builds a full income-and-expenses picture rather than relying on arrears alone.
A debt counsellor who reviews an application may also find that a particular agreement was reckless credit — for example where the credit provider never ran the required affordability assessment, or lent despite information showing the loan would make the consumer over-indebted. A reckless-credit finding can lead the court to suspend or set aside the agreement, which is a powerful add-on to ordinary re-arrangement.
How debt review works: applying to a debt counsellor (s 86)
The process is started by the consumer, not the court. Section 86(1) is the doorway:
A consumer may apply to a debt counsellor in the prescribed manner and form to have the consumer declared over-indebted.
But there is a hard timing limit. You cannot bring a particular agreement into debt review if the creditor has already begun enforcing it — specifically, once they have taken the section 129 default-notice step:
An application in terms of this section may not be made in respect of, and does not apply to, a particular credit agreement if, at the time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in section 129 to enforce that agreement.
This is the “race to the courthouse” the Act sets up: apply for debt review before the section 129 letter lands, and the whole portfolio (including the agreement in arrears) can be reviewed; apply after, and that particular agreement falls outside the review even though the rest of your debts can still be re-arranged. Practically, anyone in trouble should consult a debt counsellor at the first missed payment, not after a summons.
Once an application is accepted, the counsellor must, within the prescribed time, decide whether the consumer appears to be over-indebted, notify all listed credit providers and every registered credit bureau, and then make a determination. Section 86(7) sets out the three possible outcomes:
If, as a result of an assessment conducted in terms of subsection (6), a debt counsellor reasonably concludes that— (a) the consumer is not over-indebted, the debt counsellor must reject the application, even if the debt counsellor has concluded that a particular credit agreement was reckless at the time it was entered into; (b) the consumer is not over-indebted, but is nevertheless experiencing, or likely to experience, difficulty satisfying all the consumer’s obligations under credit agreements in a timely manner, the debt counsellor may recommend that the consumer and the respective credit providers voluntarily consider and agree on a plan of debt re-arrangement; or (c) the consumer is over-indebted, the debt counsellor may issue a proposal recommending that the Magistrate’s Court make either or both of the following orders— (i) that one or more of the consumer’s credit agreements be declared to be reckless credit …; (ii) that one or more of the consumer’s obligations be re-arranged …
Note — Sub-paragraph (c)(ii) lists how obligations may be re-arranged — extending the term and reducing each instalment, postponing payment dates, or recalculating the debt — for example where the credit provider contravened the fee, interest or disclosure rules.
Where the counsellor and every credit provider agree on a re-arrangement for a consumer who is not over-indebted but struggling, the deal can be filed as a consent order; otherwise, an over-indebtedness finding is referred on to the Magistrate’s Court. The Supreme Court of Appeal gave the early, foundational guidance on how these mechanics are meant to run in Nedbank Ltd v National Credit Regulator [2011] ZASCA 35, which untangled several practical problems in the first years of the debt-counselling regime.
From debt counsellor to court: the section 87 re-arrangement order
The debt counsellor proposes; the Magistrate’s Court disposes. The court is not a rubber stamp — it conducts a hearing and weighs the proposal against the consumer’s actual means before it makes (or refuses) an order.
If a debt counsellor makes a proposal to the Magistrate’s Court in terms of section 86(8)(b), or a consumer applies to the Magistrate’s Court in terms of section 86(9), the Magistrate’s Court must conduct a hearing and, having regard to the proposal and information before it and the consumer’s financial means, prospects and obligations, may— (a) reject the recommendation or application as the case may be; or (b) make— (i) an order declaring any credit agreement to be reckless, and an order contemplated in section 83(2) or (3), if the Magistrate’s Court concludes that the agreement is reckless; (ii) an order re-arranging the consumer’s obligations in any manner contemplated in section 86(7)(c)(ii); or (iii) both orders contemplated in subparagraph (i) and (ii).
The court’s re-arrangement order is what makes the new, reduced repayment plan legally binding on the creditors. Note the two distinct powers: the court can re-arrange the consumer’s obligations, and — where an agreement was reckless — it can also suspend or alter that agreement under section 83. The two can be combined in one order.
The protections of debt review — and their limits
Debt review only works if the consumer is shielded while the process plays out. The Act supplies two shields. First, a consumer under review may not take on new credit: once an application is filed (or over-indebtedness is alleged in court), the consumer must not incur further charges under a credit facility or enter into any further credit agreement, other than a consolidation agreement, until the review is resolved (s 88(1)). Second, creditors are held off enforcing:
Subject to section 86(9) and (10), a credit provider who receives notice of court proceedings contemplated in section 83 or 85, or notice in terms of section 86(4)(b)(i), may not exercise or enforce by litigation or other judicial process any right or security under that credit agreement until— (a) the consumer is in default under the credit agreement; and (b) one of the following has occurred …
Note — The bar is “subject to section 86(9) and (10)” — meaning it does not survive a lawful termination of the review under s 86(10), below.
But the moratorium is not a permanent freeze. Section 86(10) lets a credit provider pull a defaulting consumer’s agreement out of the review:
If a consumer is in default under a credit agreement that is being reviewed in terms of this section, the credit provider in respect of that credit agreement may give notice to terminate the review in the prescribed manner to— (a) the consumer; (b) the debt counsellor; and (c) the National Credit Regulator, at any time at least 60 business days after the date on which the consumer applied for the debt review.
The interplay between this termination right and the section 129 enforcement step is exactly what the Supreme Court of Appeal had to resolve in Collett v FirstRand Bank. Malan JA explained how section 86(2) and section 86(10) fit together — a creditor can enforce a defaulted agreement provided the consumer had not already applied for review and the section 129 step has been taken:
The court was clear that debt review is not a debt write-off. As Malan JA put it, “the purpose of the debt review is not to relieve the consumer of his obligations but to achieve either a voluntary debt re-arrangement or a debt re-arrangement by the Magistrate’s Court” — the NCA “places priority on the eventual satisfaction of all responsible consumer obligations”. Section 86(10) gives the credit provider a genuine right to terminate after the 60-business-day window if the consumer is in default; the consumer’s answer, under section 86(11), is to ask the court to order the review to resume on just conditions. A third protection runs throughout: the statutory in duplum cap in section 103(5) stops the interest, fees and charges that accrue during default from ever exceeding the unpaid principal (the subsection is quoted in full on that page).
How debt review ends: the section 71 clearance certificate
Debt review is meant to end — with the consumer debt-free and their credit record restored. The closing document is the clearance certificate under section 71. Once the re-arranged debts are paid off, the consumer applies for it, and the counsellor must issue it if every obligation has been satisfied:
A consumer whose debts have been re-arranged in terms of Part D of this Chapter, may apply to a debt counsellor at any time for a clearance certificate relating to that debt re-arrangement. … A debt counsellor who receives an application in terms of subsection (1), must— (a) investigate the circumstances of the debt re-arrangement; and (b) either— (i) issue a clearance certificate in the prescribed form if the consumer has fully satisfied all the obligations under every credit agreement that was subject to the debt re-arrangement order or agreement, in accordance with that order or agreement; or (ii) refuse to issue a clearance certificate, in any other case.
Note — On receiving a copy of the certificate, a credit bureau must expunge the record that the consumer was under debt re-arrangement (s 71(5)). If a counsellor wrongly refuses, the consumer may take that decision to the National Consumer Tribunal (s 71(3)).
Short of that happy ending, debt review can also end by termination — the section 86(10) route confirmed in Collett — after which the credit provider may resume enforcement (subject to the consumer’s right to ask the court to revive the review). Either way, the practical lesson is the same one this guide opened with: debt review is a powerful but time-sensitive remedy, available only on regulated credit agreements and only to natural persons, and best invoked early — before a creditor takes the section 129 step that closes the door under section 86(2).
If you are weighing debt review, or you are a credit provider deciding whether and when to terminate a review or enforce, the order of the questions matters: does the NCA apply to this agreement at all (see when the NCA applies); is the consumer over-indebted on the section 79 test; and has the section 129 / 86(2) timing line been crossed? Get those right and the rest of the machinery follows.
Frequently asked questions
No. Debt review is only for natural persons: s 78(1) excludes juristic persons from this Part of the Act, and the machinery assumes an individual’s income and household budget. A company or close corporation in distress uses business rescue under the Companies Act, not debt review. Remember too that the NCA does not apply at all where the consumer is a juristic person at or above the R1 000 000 threshold, or under a large agreement with a smaller company — so there is no NCA debt review to invoke in those cases.
Largely, yes — but not absolutely. Once you apply under section 86(1), a credit provider that has received notice may not enforce by litigation until you are in default and an event in section 88(3) has occurred. The two big limits are section 86(2) (you cannot review an agreement if the creditor had already taken the section 129 step before you applied) and section 86(10) (a creditor may terminate the review at least 60 business days after your application if you are in default), confirmed in Collett v FirstRand Bank.
It is the document that ends debt review and clears the debt-review flag from your credit record. Under section 71, once your debts have been re-arranged you apply to your debt counsellor, who must issue the certificate if you have fully satisfied all the obligations under every agreement subject to the re-arrangement. You file it with the credit bureaux, which must then expunge the listing. If the counsellor wrongly refuses, the National Consumer Tribunal can order them to issue it.
No. Debt review re-arranges your debts under the NCA — you keep your assets and pay reduced instalments until the debt clears and you get a clearance certificate (s 71). Sequestration surrenders your estate and makes you insolvent; administration (s 74 of the Magistrates’ Courts Act) is a separate route for smaller debts. Debt review aims at the eventual satisfaction of all obligations rather than writing them off, so it is usually the least drastic option.