What Is Debt Review and How Does It Work?

What Is Debt Review?

Debt review, also called debt counselling, is a statutory debt relief measure created under Section 86 of the National Credit Act. It is a structured process in which a registered debt counsellor formally assesses whether you are over-indebted, meaning your monthly debt repayments exceed what you can reasonably afford after covering basic living expenses.

If you qualify, the debt counsellor negotiates with all your credit providers to reduce your monthly instalments, extend your repayment terms, and in some cases secure a reduction in interest rates. The restructured repayment plan is then confirmed by a magistrate's court or the National Consumer Tribunal, making it legally binding on all parties involved.

Once you are placed under debt review, a flag is placed on your credit profile at all four major credit bureaus: TransUnion, Experian, Compuscan and XDS. This flag signals to lenders that you are under debt review, which means you cannot take out any new credit during the process. While this restriction feels limiting, it is actually a protective measure designed to prevent you from sinking deeper into debt while you work your way out of it.

Debt review applies to all unsecured and secured debt, including personal loans, credit cards, vehicle finance and home loans. It does not cover administrative fines, maintenance orders or student loans that fall outside the NCA.

Who Qualifies for Debt Review?

To qualify for debt review, you must be a South African consumer who is over-indebted, or who is at risk of becoming over-indebted in the near future. Over-indebtedness is defined under the NCA as a situation where your total monthly debt repayments, including interest and fees, exceed your net disposable income after reasonable living expenses have been deducted.

You must have a regular income, whether from formal employment, a business or any other lawful source, since debt review is a repayment programme, not debt write-off. SASSA grant recipients may also qualify if their grant income is sufficient to support a restructured payment plan.

There are a few situations in which you will not qualify. If a credit provider has already obtained a court judgment against you and begun legal enforcement proceedings, debt review may no longer be available for that specific debt. You also cannot apply for debt review if you are already insolvent or sequestrated. Furthermore, debt review cannot be used to cover a single debt in isolation: it must encompass all your credit agreements regulated under the NCA.

Self-employed individuals and those with irregular income can still apply, but the debt counsellor will need a clear picture of your average monthly earnings to build a viable repayment plan. The sooner you approach a debt counsellor once you recognise financial distress, the more options will be available to you.

How Does the Debt Review Process Work, Step by Step?

The debt review process follows a structured sequence regulated by the NCA and the NCR's guidelines.

Step 1: Application. You complete a Form 16 application and submit it to a registered debt counsellor along with proof of income, a list of all debts, bank statements and identity documents. The counsellor charges an application fee at this stage.

Step 2: Assessment. The debt counsellor has five business days to assess your financial position. If you are found to be over-indebted, they issue a Form 17.2 to all your credit providers and the credit bureaus, formally placing you under debt review.

Step 3: Negotiation. The counsellor proposes a restructured repayment plan to all credit providers. Most reputable counsellors aim to reduce interest rates and extend terms to bring your combined monthly payment to a figure you can sustain.

Step 4: Court order. The restructured plan is submitted to a magistrate's court or the National Consumer Tribunal for confirmation. Once approved, it becomes a court order binding on all parties.

Step 5: Repayment via payment distribution agency. Your single monthly payment is made to an NCR-accredited Payment Distribution Agency (PDA), which distributes funds to each creditor according to the court-approved plan. Many creditors use DebiCheck-authenticated debit orders to collect their portion, adding an extra layer of security.

Step 6: Clearance. Once all debts included in the plan are settled, the debt counsellor issues a clearance certificate (Form 19), and the debt review flag is removed from your credit bureau records.

What Does Debt Review Cost? A Concrete Example

Debt review is not free. The NCR sets maximum fees that debt counsellors may charge, and it is important to understand these before you sign anything.

Typical fee categories include: an application fee (capped at R50), a restructuring fee (capped at one month's instalment under the new plan, up to a maximum of R8,000 for a joint application), and an ongoing monthly aftercare fee of around 3% to 5% of the monthly distribution amount, subject to NCR caps. Legal fees for obtaining the court order are separate and vary by firm.

To make this concrete, consider the following example. Suppose your restructured monthly payment under debt review is R3,500 per month. The restructuring fee would be approximately R3,500 (one month's payment, assuming it falls below the cap). If your aftercare fee is 5% of R3,500, you pay R175 per month toward administration. Over a 48-month repayment plan, the total aftercare fees alone would amount to R8,400. Added together with the restructuring and legal fees, the total cost of the process could easily exceed R15,000, though the exact figure depends on the counsellor and the complexity of your debt.

This is why it pays to compare registered debt counsellors and ask for a full fee disclosure upfront. The benefit, however, is significant: a consumer with R120,000 in unsecured debt paying R6,000 per month at high interest rates might see their monthly obligation restructured to R2,800 over an extended term, freeing up meaningful cash flow immediately.

Benefits and Risks of Debt Review

Debt review offers several meaningful protections and benefits, but it also carries real disadvantages that you should weigh carefully.

Key benefits include: immediate legal protection from creditor calls, letters and legal action once the process is formally initiated; a single, reduced monthly payment that replaces multiple separate obligations; potential reductions in interest rates negotiated by your counsellor; and protection of secured assets such as your home or vehicle, provided you maintain payments.

However, there are honest risks and downsides to acknowledge. First, you cannot access any new credit for the entire duration of the process, which could last three to seven years or longer depending on the size of your debt. Second, the debt review flag on your credit profile at TransUnion, Experian, Compuscan and XDS is visible to any lender who checks your record, making credit approval impossible while you are listed. Third, if you stop paying your restructured instalments, creditors can apply to have the debt review order rescinded and resume legal action against you. Fourth, the total amount you repay over the extended term may exceed what you would have paid originally, because of the longer repayment period, even if monthly payments are lower.

Debt review is also not suitable for everyone. If your debt is manageable with minor lifestyle adjustments or a consolidation loan, that may be a less restrictive route.

How to Get Your Clearance Certificate and Exit Debt Review

Exiting debt review correctly is as important as entering it correctly. The formal exit mechanism is the clearance certificate, known as Form 19, issued by your registered debt counsellor once all debts included in your repayment plan have been settled in full. For home loans, a clearance certificate can be issued once all other debts are paid up, even if the home loan is still running, provided it is up to date.

Once the clearance certificate is issued, your debt counsellor is obliged to notify all four credit bureaus: TransUnion, Experian, Compuscan and XDS. The debt review flag must be removed from your profile within five business days of notification. You can verify this by obtaining a free credit report, which you are entitled to once a year from each bureau under the NCA and the Protection of Personal Information Act (POPIA).

If a creditor fails to update their records or a bureau fails to remove the flag timeously, you have the right to lodge a complaint with the NCR or the Credit Ombud.

There is no shortcut to a clearance certificate: you cannot simply withdraw from debt review partway through unless all included debts are settled or a court grants a rescission of the order. Consumers who disappear from the process without formal exit remain flagged indefinitely, which severely damages their long-term credit health.

After clearance, focus on rebuilding your credit score gradually by maintaining a current account, paying any remaining obligations on time, and avoiding overextension.

Your Rights Under the National Credit Act During Debt Review

South African consumers have strong statutory rights throughout the debt review process, all anchored in the National Credit Act and enforced by the NCR and the Financial Sector Conduct Authority (FSCA).

You have the right to approach any NCR-registered debt counsellor of your choosing. You cannot be forced to use a counsellor recommended by a creditor. You also have the right to full disclosure of all fees before signing any debt counselling agreement.

Once a Form 17.2 has been issued, creditors are legally prohibited from taking action to enforce a credit agreement, including sending letters of demand, initiating summons or repossessing assets, as long as you comply with your restructured payment plan. Any creditor who violates this protection can be reported to the NCR.

You are also protected under POPIA when it comes to how your personal and financial data is handled by the debt counsellor, the PDA and any associated parties. Your information may only be used for the purpose of administering your debt review and may not be shared without your consent.

If you have a complaint about a debt counsellor, you can lodge it with the NCR. If the complaint involves a credit provider, you can approach the Credit Ombud or the relevant regulatory body. The NCR's toll-free number and online complaints portal are available on their official website, and there is no charge for lodging a complaint.