In this article, we share everything you need to know about debt mediation and also give you a few insider tips and secrets.

What is Voluntary Debt Mediation?

Debt mediation is a debt relief program known as Voluntary Debt Mediation Solution which was implimented in early 2012. This is program is unregulated by the NCR but not recommended for South African consumers. Should a consumer need debt intervention then we would recommend debt counselling.

Debt mediation is a process whereby a third-party mediator assists you and your creditors to come to an agreement on your debt repayments. The mediator will facilitate discussions between you and your creditors and help you find a solution that is acceptable to both parties.

Debt mediation can be an effective way to reduce your outstanding debt and make repayments more manageable. It can also help to improve your relationship with your creditors, as you will be working together towards a solution.

If you are struggling to repay your debts, or are at risk of defaulting on your payments, then debt mediation could be a good option for you. However, it is important to remember that this is not a magic solution, and you will still need to make regular debt repayments in order to eventually clear your debt.

Why are Debt Counsellors (and the NCR) against Debt Mediation?

1. The NCR stopped the implementation of voluntary debt mediation in 2012 because it undermines the National Credit Act 34 of 2005 (NCA) and statutory debt counselling and will prejudice consumers.
2. The NCA makes provision for debt counselling and a mechanism for voluntary debt restructuring in section 86 which must be supported and used by all credit providers. These mechanisms protect both consumers and credit providers by ensuring debt restructuring which ensures that all credit providers are eventually repaid.
3. The NCR does not support voluntary debt mediation and will not approve it under any circumstance. The NCR has written letters to BASA and other industry associations to cease all work relating to voluntary debt mediation.
4. Credit providers, debt counsellors, credit bureaus and payment distribution agents are requested not to participate in discussions to introduce voluntary debt mediation. In particular, credit providers must continue using statutory debt counselling and allow all consumers to use statutory debt counselling.

Read the Number 1 3 | November 2014 NCR Circular

Disadvantages of Debt Mediation

1. There is not one simple payment plan, as with debt counselling. (see benefits of debt counselling)
2. The largest issue with the debt mediation procedure might be that there is no legal protection. The new agreements cannot be enforceable since a court or tribunal was not involved in the matter.
3. The proccess is unregulated by the NCR as it violates the National Credit Act. This means that the process is not formally recognized and therefore has no legal framework.
4. Lacks protection against creditors – having a binding contract is vitally important.
5. There is no recognized or accredited Payments Distribution Agency ensuring that the money is distributed to the consumer’s creditors.
6. The fees charged to administer this “practice” are not regulated nor listed in a legal capacity or any regulatory body. They are calculated and done so by the Mediators own discretion.

Why should I consider debt mediation?

Debt mediation is a process where you and your creditors negotiate to try and reach an agreement on your debt repayments. This can be an effective way to reduce your monthly repayments and get back on track with your finances.

There are many reasons why you might consider debt mediation. If you’re struggling to make your monthly repayments, or you’re worried about falling behind on your payments, then debt mediation could help you to get back on track. Mediation can also help if you’re in dispute with your creditors over the amount of debt you owe or the repayment terms.

Debt mediation is a confidential process, so your creditors won’t be able to see what’s being discussed. This can give you some peace of mind during the negotiation process.

If you’re considering debt mediation, then it’s important to get advice from a qualified professional before entering into any agreement with your creditors. They can help you to understand the pros and cons of debt mediation and advise you on the best course of action for your individual situation.

How does debt mediation work?

Debt mediation is a process where you meet with a debt counsellor to negotiate a payment plan that is affordable for you. The idea is to make your debt repayments more manageable so that you can eventually become debt-free.

The first step in debt mediation is to provide the debt counsellor with all of your financial information, including your income, expenses, and debts. The counsellor will then assess your financial situation and create a budget for you.

Once the budget has been created, the counsellor will contact your creditors and try to negotiate lower interest rates and monthly payments. If successful, this will lower your monthly payments and make it easier for you to repay your debts.

The goal of debt mediation is to help you get out of debt as quickly as possible so that you can start rebuilding your credit. While it can be a lengthy process, it is an effective way to reduce your debts and get back on track financially.

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Possible outcomes of debt mediation?

Debt mediation is a process where you and your creditors negotiate to agree on a repayment plan. This is usually done through a third-party mediator, who will help you and your creditors come to an agreement.

There are three possible outcomes of debt mediation:

1. You and your creditors agree on a repayment plan. This means that you will make regular payments to your creditors until the debt is paid off.
2. You and your creditors do not come to an agreement. This means that the debt mediation process has failed, and you will have to continue making payments according to the original terms of your loan agreement.
3. The mediator decides that debt mediation is not appropriate for your situation. This could happen if the mediator believes that you cannot afford to make the payments required under a repayment plan, or if the mediator feels that negotiation is not going to be productive.

Our pro tip

Do not go for debt mediation rather apply for debt counselling. You can contact us on 0410125036 or Apply HERE for a free, unbiased and expert advice on how to reduce debt.

Book your appointment below.

You can book an appointment with one of our professionals by following these easy steps. Click the book an appointment page on the above menu or Call 0410125036 or Send a WhatsApp to 0727703674