Struggling with debt? You’re doing the right thing in reaching out for help. But just make sure that the company that’s promising to help you is actually legit. And remember that credible debt review companies follow a regulated process that’s there to protect consumers – so be very cautious if anything sounds too good to be true.
Here are some of the common scams and red flags you should watch out for.
Watch out for unsolicited calls
One of the biggest warning signs is receiving an unexpected phone call from someone claiming that the National Credit Regulator (NCR), your bank or another financial institution has referred them to you.
Legitimate debt counsellors do not randomly contact consumers or obtain their personal information without consent.
If someone phones you claiming the NCR or your bank gave them your details, or that you’re being overcharged and they can reduce your debt, be extremely careful.
Ask them: “How did you get my details?”
If they can’t provide a clear answer that makes sense to you, end the conversation immediately.
Don’t ever share your credit report without a reason
Your credit report is a record of your credit history and contains your personal information, including your address, employment details, credit accounts and insurance information.
There are lots of good reasons why a company might ask for your credit report, but you need to understand what those reasons are, because there’s also the potential for misuse.
A legitimate debt counsellor will always explain:
- Why they need to access your credit report;
- How the information will be used; and
- Ask for your explicit permission before requesting it.
If someone pressures you into giving consent without saying why they need it, walk away.
Be wary of promises that sound too good to be true
Debt review is designed to make your debt more affordable – but it won’t disappear.
Dodgy companies may promise your debt will be reduced or written off entirely. They might offer a guaranteed repayment amount even before your finances have been assessed, a guaranteed interest rate reduction, or an instant improvement to your credit record – but this isn’t up to them. Debt review is a negotiated process and your monthly repayment will depend on your personal situation and your creditors.
Every debt review application begins with a detailed affordability assessment to determine whether you are over-indebted and what repayment plan is realistically sustainable.
If someone gives you a repayment amount within minutes, without reviewing your income, expenses and credit agreements, that’s a major red flag.
Check that the maths makes sense
Scammers often rely on consumers not questioning unrealistic promises.
For example, if you owe R500 000 and someone tells you that you can repay this money with a monthly installment of only R2 000 over five years, the numbers simply don’t add up. In this scenario, you would have paid back only R120 000 at the end of five years, and that’s without taking interest payments into account.
Before agreeing to anything, ask the provider to explain exactly how the proposed repayment plan will work. A legitimate debt counsellor should be able to explain the calculations clearly and answer your questions without hesitation.
Verify that your debt counsellor is registered
One of the easiest ways to protect yourself is to verify that your debt counsellor is registered with the National Credit Regulator.
Ask for:
- their NCR registration number (often referred to as their DC number); and
- their full registered name.
You can then search the NCR’s public register to confirm that they are authorised to provide debt counselling services. Having the DC number helps pull up the correct records quickly as names can contain typos. (In case you were wondering, Debt Rescue’s DC number is 474).
If someone refuses to provide these details or avoids the question, consider it a warning sign.
Know where your money is going
Legitimate debt review companies don’t ask you to pay money directly to them. Instead, legitimate debt review uses a Payment Distribution Agency (PDA), which distributes your payments to your credit providers and provides monthly statements showing exactly where your money has gone.
A legitimate debt review process should never feel rushed
When you meet with a debt counsellor, you should expect them to:
- explain the debt review process clearly;
- review your income and expenses in detail;
- assess all of your credit agreements;
- obtain your consent before proceeding;
- answer your questions openly; and
- provide copies of the relevant documentation.
You should never feel pressured into making an immediate decision.
Remember your rights
As a consumer, you have the right to:
- give informed consent before your credit report is accessed;
- ask questions and receive clear answers;
- receive copies of relevant documents;
- have your personal information treated confidentially; and
- receive regular updates throughout the debt review process.
A reputable debt counsellor will welcome these questions because transparency is central to ethical debt review.
The bottom line
Debt review is not a quick fix. It is a legal process that helps over-indebted consumers regain control of their finances. That means there are certain steps that must be followed to protect you.
If someone promises instant results, guaranteed savings or debt write-offs, take a step back and verify their credentials before sharing any personal information.
The best protection against scams is to understand how legitimate debt review works -and choosing a registered debt counsellor who is committed to acting in your best interests.
At Debt Rescue, we’re committed to helping consumers get back on their feet – and we have over 15 years’ experience in doing so. Contact us today for an obligation free quote.