Debt Mediation

 

A PROBLEMATIC PROCESS

In 2013, credit providers tried to popularise a new debt relief process, namely the Voluntary Debt Mediation Solution (VDMS). Even though this process shares similarities with debt review, it has been found to be problematic in a number of ways.

  1. Complicated and Drawn-out

One such problem is that credit providers alone can adjust the consumer’s payment plan, which is stored on their company database of client profiles.

This problem is to blame for the drawn-out, complicated nature of debt mediation, as it doesn’t allow for a single combined payment plan, as with debt review. You see, in most cases, indebted consumers have a couple of loans, accounts, credit cards, store cards, vehicle finance etc. with a number of different credit providers.

As follows, if you wanted the total amount you spend on debt repayments each month to be reduced, your debt mediator would have to negotiate with all of your credit providers on an individual basis, to have your various monthly instalments and interest rates reduced. As you can imagine, this process has the capacity to be quite laborious.

  1. No Legal Protection

Another problem with debt mediation is that it doesn’t involve obtaining a court order. Consequently, if your credit provider threatened to take legal action against you, there would be no order in place to legally prevent them from doing so, as there would be if you were under debt review.

Under debt mediation, only a few of your instalments may be individually reduced, so the relief you’d experience would be negligent, whereas debt review restructures your whole credit profile.

  1. Violates The NCA

Accordingly, the National Credit Regulator (NCR) does not approve of debt mediation, as it violates the regulations of the National Credit Act (NCA).  Furthermore, debt mediation does not provide consumers with protection against the repossession of their assets or having unlawful garnishee orders attached to their salaries, whereas debt review protects consumers from all this and more.

 

Our Services are available across South Africa, including: