How to Prepare for a Debt Payment Arrangement in South Africa

Key takeaways

First identify the process

“Payment arrangement” can describe several legally different processes. Identify which one is being discussed before sending documents or accepting terms:

• Informal payment proposal: a debtor asks a creditor or authorised collector to accept payment on different dates or in smaller instalments. A proposal is not an agreement until the relevant creditor accepts it, preferably in writing.
• Settlement: the parties agree how a disputed or admitted balance will be resolved. The document may include an admission, waiver, release, interest term, enforcement consent or “full and final” wording.
• Acknowledgement of debt: a document records liability and payment terms. Its legal and prescription consequences can be significant.
• Debt review: section 86 of the National Credit Act (NCA) creates a statutory process for a consumer who may be over-indebted. It is conducted by a debt counsellor registered with the National Credit Regulator (NCR), not by any company using debt-relief language.
• Court-managed payment: a judgment, debt rearrangement order, administration order or other court process may already control what must be paid and how terms can change.

An informal proposal to one creditor is not the same as debt review, does not create a payment holiday and should not be assumed to stop interest, fees, credit reporting, cancellation, repossession or enforcement. The National Financial Ombud (NFO) has cautioned that a bank is not legally obliged to accept every proposed arrangement; affordability, arrears and the effect of reduced payments over time may influence its decision.

Check for urgent risks before negotiating

Put every letter of demand, NCA notice, summons, court order, warrant, repossession notice and sale notice at the front of the file. Record when and how it was received. A negotiation does not replace a required response to court papers, and an unanswered proposal should not be treated as an extension.

Obtain legal advice before making an admission or payment where:

• the debt is denied, duplicated, already paid or calculated incorrectly;
• the claimant or collector has not shown its identity or authority;
• the agreement may not be yours, identity theft is suspected or the account was opened fraudulently;
• the debt is old and prescription may be relevant;
• the amount includes disputed interest, fees, insurance, collection costs or legal costs;
• secured property, a home, vehicle, essential asset or business operation is at risk;
• a summons, judgment, emoluments attachment order or other court document exists; or
• the proposed document includes consent to judgment, acceleration, security, a waiver or a release.

Under the Prescription Act, different categories of debt have different periods. Section 11(d) sets three years for many debts not assigned another period, while sections 12 to 14 address when prescription begins and how it may be interrupted. An express or tacit acknowledgement of liability can interrupt prescription. Whether a message, signed arrangement or payment amounts to an acknowledgement depends on the facts. Do not assume that every debt older than three years has prescribed, and do not acknowledge an old or disputed debt before obtaining advice on the account history.

Build a verified account file

Keep original records unchanged and use a separate indexed working copy. Create a one-page account summary for each creditor instead of mixing several accounts into one chronology.

1. Claimant and authority

Record the creditor's full legal name, contact details and account number. If a collection agency or law firm is involved, keep its instruction, mandate or proof of cession if provided, together with the original creditor's details. Ask in writing for enough information to understand who owns the claim and who is authorised to negotiate or accept payment.

Do not send identity documents, bank credentials or full financial records to contact details taken only from an unsolicited message. Verify the organisation and payment channel independently. Keep proof of that verification.

2. Agreement and amendments

Collect the signed credit agreement, quotation or other contract; pre-agreement statement where applicable; terms and conditions; suretyship; security documents; insurance records; amendments; prior payment plans; settlement offers; and any acknowledgement of debt.

Read the documents for the payment date, interest method, fees, default terms, acceleration, allocation of payments, insurance, security, cancellation and enforcement provisions. Mark missing pages rather than guessing what they contained.

3. Statements and balance calculation

Obtain a statement that shows the opening balance, transactions, payments, interest, fees, credits and current claimed balance. If the account has moved between a creditor and collector, reconcile both sets of figures.

Create a calculation with separate columns for:

• capital or principal;
• contractual interest;
• default interest, if claimed;
• service, initiation or account fees;
• insurance premiums;
• collection charges and legal costs;
• payments, reversals, refunds and credits; and
• the difference between the claimed and verified balance.

Do not use the arrangement to settle an unexplained figure. List every disputed item and request the source document or calculation supporting it.

4. Payment and communication history

Keep bank statements, debit-order records, receipts, payment confirmations and allocation statements. Mask unrelated transactions in the disclosure copy. Link each payment to its date, amount, reference and the account to which it should have been allocated.

Preserve emails, letters, messages, call-reference numbers, voice notes lawfully held, and notes of telephone conversations. Record any earlier promise to pay, balance confirmation, dispute, settlement or payment plan. Those communications may affect both the factual and legal position.

5. Notices and legal process

Keep every default notice, section 129 notice, letter of demand, summons, return of service, court order and enforcement document in full. Record the document date, receipt date, response date and next listed event. Do not rely on the creditor's description of a document; give the actual document to the lawyer or adviser.

The NCA contains procedures that may apply before a credit provider enforces a regulated credit agreement. Application depends on the agreement, parties, default history and procedural stage. Once legal process is underway, generic negotiation guidance is not a substitute for advice on the document and court rules.

Prepare a truthful affordability picture

An arrangement that fails after one or two instalments can increase costs and enforcement risk. Calculate affordability from evidence, not from the amount you hope the creditor will accept.

Prepare recent proof of:

• net income and the dates on which it is received;
• variable, irregular or seasonal income using a representative period;
• essential housing, utilities, food, transport, education and healthcare costs;
• maintenance and dependant obligations;
• taxes, statutory deductions and necessary business expenses;
• other debts, instalments, arrears and security;
• assets relevant to the proposal; and
• reasonably foreseeable changes, such as the end of a contract or a temporary expense.

Separate essential expenditure from discretionary expenditure and explain unusual items. Keep the source records, but disclose only what the creditor, debt counsellor, ombud or lawyer reasonably needs through a secure channel.

Calculate a conservative monthly surplus. Allow for ordinary variation and payment timing. If there is no reliable surplus, repeatedly offering an unaffordable instalment is not a sustainable solution. Advice on formal debt review, insolvency, business rescue or another route may be needed, depending on who owes the debt and the overall position.

Draft a proposal that can be evaluated

State that the document is a proposal unless and until accepted. Identify the account and disputed issues without making a broader admission than intended. A practical proposal should address:

1. the proposed instalment, frequency, first payment date and payment method;
2. the evidence-based reason for the affordability change, stated briefly;
3. whether the amount is temporary, stepped or intended to continue until settlement;
4. how payments will be allocated between capital, interest, fees and costs;
5. what interest, fees, insurance and collection charges will continue;
6. how existing arrears and any balloon or residual amount will be treated;
7. whether enforcement, repossession, cancellation or adverse reporting will be held while the arrangement is performed;
8. when the arrangement will be reviewed and what documents a review requires;
9. what happens after a missed, short or late payment;
10. whether early or additional payments are allowed without penalty;
11. whether the proposal settles the full balance or only changes payment timing; and
12. who has authority to accept and where written acceptance will be sent.

Ask for a complete written response. If accepted, compare the final document with the proposal before paying. Confirm the balance, total expected cost, payment reference and destination using a verified channel. Keep the acceptance, proof of every payment and updated statements.

Do not describe a reduced payment as “full and final settlement” unless the creditor has clearly accepted that consequence. Do not assume silence, a debit-order collection or receipt of one instalment proves acceptance of every proposed term.

When debt review may be the relevant route

Debt review is designed for a consumer who may be over-indebted under the NCA. It involves an assessment and, where appropriate, proposals or an application to restructure qualifying obligations. It is not simply a private payment arrangement and it has consequences for access to further credit, fees, payment obligations and credit-bureau status.

Use the NCR's register to verify the individual debt counsellor and registration number. Ask for the process, fees, payment-distribution method, legal costs, timelines and exit consequences in writing before applying. The NCR warns that debt counselling is not free and that consumers remain responsible for payments; it should not be marketed as debt cancellation or a payment holiday.

The stage of each account matters. Give the debt counsellor every notice and court document immediately. Do not assume that applying for debt review automatically reverses completed enforcement steps or includes every debt.

Escalating a credit-provider complaint

Separate inability to pay from a complaint about unlawful or incorrect conduct. A payment proposal asks for new commercial terms. A complaint may concern an incorrect balance, unauthorised charge, payment allocation, credit listing, reckless lending allegation, collection conduct or failure to follow an agreed arrangement.

Complain first through the credit provider's published process and preserve the complaint, attachments, proof of delivery, reference number and response. The NFO Credit Division may consider complaints against participating credit providers within its jurisdiction after the provider's internal process has been used. It can assess a complaint; it does not compel every provider to grant an unaffordable or unsupported proposal.

When to obtain legal help

Seek prompt advice if the debt, identity of the claimant, prescription position, balance or proposed admission is disputed; if secured property or a business is at risk; if there are several creditors and no sustainable surplus; or if legal process has started. Bring the indexed account file, affordability schedule, proposal, response and a list of missing documents.

For a consultation, ask the lawyer to identify the immediate deadline, verify the claim and balance, explain the consequence of any admission, classify the available process and review the exact proposed terms. A lawyer cannot evaluate a payment plan reliably from the monthly instalment alone.

Related Lexuno resources

• Review the credit agreement glossary entry before classifying the account.
• Read the prescription glossary entry before responding to an old or disputed claim.
• Compare informal negotiation with debt review where overall over-indebtedness may be the issue.
• Use the credit and finance checklist to organise the account records.
• If court papers have arrived, work through the summons response checklist immediately.

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