Consumer Assist, for example, says it received about 10 applications a day for assistance when it opened its doors in August 2007, two months after the National Credit Act (NCA) became law.

It now receives an average of 200 applications a day.

The company says at least 51m accounts were listed with credit bureaus as at September last year, with about 7 000 vehicles and 2 000 houses being repossessed by banks each month.

"This was due to reckless lending by most institutions prior to the introduction of the NCA, when people were able to have up to three credit cards," says Consumer Assist MD Andre Snyman.

The NCA makes provision for counselling for people who are over indebted, and provides consumer protection against creditors wanting to take legal action.

Debt counselling involves developing a repayment plan that is affordable to the debtor and acceptable to the creditor.

According to Statistics SA, the total number of civil summonses issued for debt increased by 3,5% for the three months to the end of September, an annualised increase of 16,7%.

Meanwhile, the civil number of judg ments recorded showed a decline of 13,7% compared with the three months ended September last year, indicating the effectiveness of the NCA.

"Our biggest challenge is that even though the number of applications has risen, people still don’t know about debt counselling," says Snyman. "C reditors and attorneys are failing to advise debtors before taking legal action that they have the option of debt counselling."

But Somerset West attorney Eduan Matthee says counselling seems more expensive than the debt administration route. He also alleges it’s just as corrupt.

Snyman says though there is a lot of corruption in debt collection and debt administration, there is nothing unethical going on in debt counselling. "We are regulated by the national credit regulator and the NCA and that leaves no room to rob debtors of their money," he says. "Thus far only one debt counsellor has been deregistered for irregular practices."

What are the comparative costs? The application fee for debt counselling is R50 and the rejection fee is R300. The restructuring fee is capped at R3 000 (once-off) or R4 000 if the person is married in community of property.

There is an after-care fee of 5% (excluding Vat) of the monthly instalment up to a maximum of R300.

By contrast the application fee for debt administration, which involves going to court, is between R800 and R1 400 plus 12,5% of what is payable to the creditor.

Snyman says that debt counselling should definitely be an option offered to over indebted persons because it is cheaper and quicker than debt administration.

An advantage of debt counselling is that the debtor retains full control over assets and finances. "Debt counselling was an excellent thing that happened at the right time," he says.