The Debt Counselling Industry in South Africa has announced a new insurance product to assist consumers struggling with financial troubles.
In South Africa, when consumers are working with a registered debt counsellor who can put together a court approved and mandated repayment plan, up till now there has been little relief from the exorbitant fees paid to creditors when they supply insurance coverage.
The debt counselling process is different in South Africa than in America or other places. In South Africa a registered debt counsellor can restructure the debts in a formal debt review process. The counsellor puts together a repayment plan after carefully examining the financial status of the consumer while also looking to see if the lender engaged in reckless lending.
Once this review is completed the debt counsellor then takes the debt restructuring plan to the court, where it is approved and enforced.
The advantage of this new insurance product offered by The Debt Counselling Industry is that it negates the need for consumers to have to continue to pay high rate credit insurance while in a repayment plan.
Under the current scheme, consumers with credit insurance offered through their creditors pay a much higher overall cost since the banks charge interest on the insurance product financed with the line of credit.
Additionally, under the insurance policies issued by the banks the consumer would receive less of a benefit or payout in the event a claim was made against the policy if the consumer is in default.
By its very nature, a consumer with restructured debt is technically in default on their original consumer credit agreement. Up till now this left the consumer at a disadvantage.
The credit insurance product is said to be available at substantially lower rates than consumers could get through the banks.
“Now over-indebted consumers in debt review don’t need traditional products,” said Deborah Solomon of The Debt Counselling Industry. “They can use competitively priced, transparent DCI insurance instead.”
“Once a person under debt review joins the Debt Counselling Industry group life scheme, these insurance charges can be stripped out of debt repayments by sending a simple notification to all credit providers telling them about the new cover, says Solomon. “Our smart alternative has the potential to save debtors thousands of rands over the duration of these loans.”
It sounds like the coordinated debt counselling players in South Africa have launched a beneficial product that reduces consumer cost and increases the consumer benefit at a time they most need the coverage.