Did you know that South Africans are forking out approximately 76% of their salaries on debt repayments as of 2014? We’ve all been there, whether it’s a clothing account, gym membership or student loan, debt repayment is part of the consumer experience in our country. Knowing how to manage that debt and better communicate with creditors and debt collection agencies is key in forging a healthier credit score and wealthier bank account in the immediate future.

So, here’s how you can deal with creditors in an amicable manner and avoid a negative impact on your credit score:

Create A Budget
The first step to settling debts and improving your credit rating is managing your finances. Sit down and draw up a budget for coming months. Sum up your expenses and income, then work out the amount you’ll be able to spend on paying off debts. Divide this between multiple debts or creditors, should you have more than one.

Know Your Rights
Make yourself aware of the Consumer Protection Act and the rights you possess with regards to paying off your current and old debt.


If your debt is older than 3 years and you haven’t admitted to owing the debt in writing, then you can announce the debt as prescribed. This means that you won’t have to pay it off – however, if you have communicated the wish to settle the debt after this period, your admission of owing means you’ll be liable again.

Collection Agencies:

Debt collectors have a bad reputation because of a select few agencies which break the rules. These agencies are regulated by the Debt Collector’s Act (No 114 of 1998) which states they’re not allowed to:

  • Threaten to use force against a consumer or their family
  • Give or threaten to provide the consumer’s employer with information which threatens their future opportunities as an employee
  • Serve false legal documents
  • Spread false information about the consumer’s credit worthiness
  • Charge more than the tariff of fees as governed by the Debt Collector’s Council

Be Transparent
When dealing with creditors or collection agencies, be totally honest about what you can afford, how you can make payments and when you can make said payments. Don’t be tempted to offer too much if you can’t afford it, but don’t pay too little either – remember, the more you pay now, the less interest you pay in future.

Deal With Creditors
If possible, deal with creditors rather than debt collection agencies. Paying off a creditor ensures you settle the debt and may cause the creditor to view you as a potential customer in future – since you’ve proved that you pay your debts rather than avoid them. Check with the creditor first and determine whether they’ve signed off the debt to a collection agency completely, or if they’ve simply asked the collection agency to extract the debt and are paying a fee.

However, if the creditor has signed off the debt, then the collection agency will present you with an Admission of Liability document. This is a form which indicates that the debt is owed to the collection agency and not the creditor. If you sign this, you’ll be liable to pay the debt collection fees imposed by the agency, as well as the initial debt.

Request They Wipe The Debt
Always follow up and make sure that the debt has been wiped from your record so it doesn’t affect your credit score.

Get It In Writing
This is an essential part of settling debt; get everything in writing. Ensure you place your agreement with a creditor or agency in a letter and keep it on file. As a debtor, you’ll be presented with one of two documents:

a) A Section 57 Acknowledgment of Debt: this indicates you owe the debt and will pay it off in monthly installments. You’re liable for the debt and if you don’t pay it off, this document will be submitted to a court of law by the creditor.
b) A Section 58 Consent to Judgement: this indicates that the consumer consents to judgment and a deduction can be made from their salary immediately.

Regardless of which document you sign, make certain that the form is completely filled out. Never sign a blank document! Be prepared to make repayments as per these documents.

Paying off debt doesn’t have to be a pain, as long as you know how to deal with creditors. With that taped, your credit score will improve, opening you up to new possibilities as a consumer.

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