A strange document arrived across my desk last week. It looked like an order to deduct money from one of the employees accounts but was in fact an request to deduct the money from the employee’s salary and pay over to the debt administrator. So I did a bit of investigating.

Do not take this lightly as this could affect your employee financial health. These obligations need to be taken into account when deciding if an employee is able to “afford” any additional deductions such as garnishee or a IT88A demand. Therefore no demand for this sort of deduction should be implemented without first consulting/informing the affected employee

Here is the process followed when someone applies for debt management

Step 1

After receiving your application we shall do an assessment to check that whether you are over-indebted (once your monthly debt obligations and living expenses are taken from your income there is a negative figure). At this stage we will do a credit check and advise if there are any other additional accounts you did not include. If over-indebted we will continue to step 3. If not over-indebted we will advise you of our other options. A check will also be made on employment and a copy of the payslips will be requested. Be sure you do not give out any information without the employees consent

Step 2

We will notify all your credit providers, the NCR and the credit bureaus of your successful application for debt review. The credit providers will adjust their systems to show you are under debt review.

Step 3

We will go through your budget and advise on the many areas (insurances, bank fees, groceries & many more) where you can save money, which will enable you to pay off your debts in the shortest period possible.

Step 4

The credit providers are required to send us information regarding your accounts including the outstanding balance, interest rate and the monthly repayment.

Step 5

Your consultant will send you the agreed budget which outlines the amount available to your credit providers (rehabilitation amount), as well as the list of creditors included in the debt obligation list. You must go through this carefully and if you agree, sign it and send it back to the consultant. The consultant will give you details of the amount you have to pay, where to pay the amount and on which date. The Payment Distribution Agency (PDA) shall pay the specified amounts to each credit provider. It seems to me that a responsible employer (if he knowns about this arrangement) will assist the employee in this regard. If the employee agrees to this he is signing a contract that will tie up his money for a long period of time. (as much as 5 years)

Step 6

We will calculate the amounts for each credit provider and will send proposals to each credit provider outlining your agreed budget, the number of creditors included and a repayment plan for each credit provider.

Step 7

The Credit Providers may accept the proposals and if all do, we will obtain a consent order which will then be forwarded to all the credit providers. If one or more of the Credit Providers does not accept the proposed repayment plan, we will submit an application to court for the magistrate to make a final decision.

Step 8

You are required to make the agreed monthly payment each month to the Payment Distribution Agency (PDA) for the duration of the debt review. Each year we will review your budget as part of our service

If the employee wants to have this as a salary deduction they will have to sign a document giving you permission to deduct this from their salary and pay over that amount to the PDA. It would be a good idea to have an idea of the total debt to be repaid and the interest charged. The payroll department will then be able to inform the employee when the debt has been repaid.

Step 9

Once all your debt is repaid, we will issue you with a clearance certificate which we will send to all your credit providers, the NCR and the credit bureaus. Within 5 business days you credit record will be clear.

Thanks to www.debtbusters.co.za