A. Accountants are there to add value to the business, not to place undue difficulty to the finances of the business. In a nutshell, there’s no one-size fits all fee structure i.e. fees are negotiated based on the size and the amount of business activity. Research has proved that businesses that acquire the services of reputable and competent accountants have achieved greater successes than those who did not. It is also important to note that this must be done as early as possible, not only when the business is in deep financial/operational difficulty.

A. While it is unfortunate that in every profession, there will always be the so-called bad apples who tarnish the reputation of their respective professions. In light of all this, accounting bodies have made significant strides in closing financial reporting loopholes, compliance requirements and meting out harsh sanctions to those found guilty and hopefully, this would bring much needed improvements and credibility to the profession, however not all accountants are unethical and corrupt. At 5IRaccounting, we guarantee you ethical, professional and quality service.

A. There is no fixed amount and fees will depend on the nature, size and complexity of your business. All this is discussed during consultation, which is free! 

A. Independent review

An independent review is the latest addition to the Companies Act that provides limited assurance. An accounting professional may review a business’s financial statements via particular enquiries with the aim of simply determining that no financial errors or miscalculations have occurred. This type of financial review requires less rigorous investigation, and the costs inevitably are less than expected for an audit.

B. Audit

An audit requires an independent auditing team comprised of qualified auditors to review financial statements via various in-depth procedures. These financial statements are comprised of transactions and documents provided by the business undertaking the audit. An audit provides the highest level of assurance, otherwise known as reasonable assurance. It therefore carries higher authority than a review. As an audit requires far more detailed investigation into a business’s financial statements, it is a more expensive option.

A. A credit bureau collects and stores data supplied by credit providers. The data is used to draw up a record of how consumers manage their credit. Credit bureaus fulfil the duty of gathering data and compiling reports on individual consumers and allocate them a credit score.

When a consumer requests to borrow credit from a credit provider, the creditor will approach various credit bureaus in order to determine whether or not they will grant the credit. Not only will they do this in order to gauge whether or not they feel you will be able to manage the credit, but they will also assess whether the requested credit is an affordable amount for the consumer.

Any South African consumer that has a store account, bond, personal loan, etc., will have a record at more than eleven credit bureaus, who receive information from all major credit providers.

A. Your situation is what one would refer to as the classic “debt cycle”, whereby individuals borrow too much credit that they can no longer afford to pay off and therefore end up taking out additional larger loans in order to pay off their current accrued debt.

The problem is, eventually you will no longer be able to meet your debt repayments as your debt will become unaffordable. However, you need to remember that you are not alone and many South African consumers are in the same position as you right now.

A debt consolidation loan, whereby you borrow one large amount of money in order to pay off all your smaller debts would be a solution that can assist you with becoming debt free. Basically, you consolidate your debt into one amount and thus, no longer have to deal with the hassle of making multiple payments. But, due to the spiralling debt crisis in South Africa, the banks have turned down the taps on unsecured lending, making it more difficult to get a debt consolidation loan.

South African banks are only likely to grant a consumer a debt consolidation loan if they are able to comfortably afford their debt repayments. Debt consolidation loans are only paid out to personal loans and not credit card accounts, and often they are only paid to one credit provider, which hinders the process of settling your debt. Debt consolidation loans were introduced primarily for convenience.

Its main aim is to reduce the hassle of paying multiple credit providers and not a solution to help reduce debt instalments and settling debt faster. In your particular situation, it would not be possible to obtain a debt consolidation loan, due to your current affordability status, as well as due to the fact that a consolidation loan does not cover credit card debts. However 5IR Debt counselling offers an alternative debt solution similar to debt consolidation, called debt counselling.

Debt counselling is a debt solution where a debt counsellor will restructure your debts, by negotiating interest rates with your credit providers. Your monthly debt repayments will be reduced as interest rates will be renegotiated to a lower amount.

Debt counselling consolidates all your debt repayments in to one amount, without having to take out a loan and covers credit card repayments. Thus, like debt consolidation, with debt counselling you only have to make one monthly payment to a Payment Distribution Agency.

In order to find out more information about debt counselling contact 5IR Debt counselling on info@5iraccounting.co.za or visit our Website at www.5iraccounting.co.za. 

A. Prescription was introduced as means of protecting South African consumers from unscrupulous credit providers, who are accountable for recklessly lending credit and have contributed to the detrimental debt crisis South Africa currently faces. Prescription in South Africa can be better understood by reading the following expert advice.

South African consumers have the two defenses, induplum and prescription, against credit providers:

1. Induplum: The in duplum rule simply put, states that upon default, the interest charged against a consumer cannot exceed the capital outstanding, that is to say, all a consumer can only ever pay as a maximum, is double the original debt amount at the time of default.

2. Prescription: Prescription in South Africa refers to old debt, which occurs when it is no longer obligatory for a debtor to pay off their debt. Unfortunately, many South African’s are not aware that debt can prescribe.

The Prescription Act 68, implemented in South Africa in 1968, enforces the regulation of prescription and states that debt can be considered as prescribed if the following requirements occur:

• If in anyway, verbally or in writing, have failed to acknowledge the existence of the debt

• If you have not made a debt repayment for that particular debt in the last three years

• If you have not been summonsed in respect of the debt within a period of three years

If the debt has prescribed – You are not legally obligated to pay for it.

However, with regards to prescription in South Africa, it is important to bear in mind that not all debt prescribes in a period of three years. The following types of debt are likely to take an extended period of time to prescribe:

• Judgement debt only prescribes after 30 years

• Mortgage/Home loan debt

• Debts owed to the state/municipality. E.g. Tax, Municiple Debt, TV licenses

It is perfectly legal for a debt collector or attorney to demand payment for a prescribed debt. It is up to a debtor to raise prescription as a defence.

The purpose of prescription in South Africa is to compel creditors and collections agents to collect money owed to them within specified period and not delay recovery so that it accumulates massive amounts of interest and costs.

A. Reckless lending is something that has become a vital concern to us, as many South African consumers have fallen victim to it. If you feel you have entered into a credit agreement and witnessed a case of reckless lending, immediately contact 5ir debt counselling on info@5iraccounting.co.za.

According to the National Credit Act, the regulations about reckless lending go as follows:

80. (1) A credit agreement is reckless if, at the time that the agreement was made, or at the time when the amount approved in terms of the agreement is increased, other than an increase in terms of section 119(4)-

(a) the credit provider failed to conduct an assessment as required by section 81(2), irrespective of what the outcome of such an assessment might have concluded at the time; or

(b) the credit provider, having conducted an assessment as required by section 81(2), entered into the credit agreement with the consumer despite the fact that the preponderance of information available to the credit provider indicated that-

(i) the consumer did not generally understand or appreciate the consumer’s risks, costs or obligations under the proposed credit agreement; or

(ii) entering into that credit agreement would make the consumer over-indebted.

Reckless lending can be identified by the following:

The client’s net income is less than their debt obligations per credit report

No recent change of circumstance or accounts taken out afterwards

No fraudulent activity by the client

The credit agreement will have to have been entered into after the 1st June 2007, and the information on the agreement would have to be correct at the time of application, so that the information you have given to the credit provider is truthful. If the credit agreement is reckless then we would recommend taking this to court and the magistrate would be able to make a judgement on the matter.

Reckless lending does not apply to agreements before June 2007 or any of the following:

• A school loan or student loan

• An emergency loan

• A public interest credit agreement

• A pawn transaction

• An incidental credit agreement

A. Credit providers have the right to reject the debt repayment plans. We will do our best to construct a new repayment plan for the credit providers, however if this is not successful, the matter will be referred to the Magistrate’s Court for further examination and final decision making.

5IR Debt counselling has to prove to the Magistrates Court that the budget worked out by the company for the client is reasonable.  Even if certain credit providers reject the debt restructuring proposal, we can get a court order granted by the Magistrates Court, which will formalise the debt rearrangement proposal. Therefore meaning the clients debt will officially be restructured and the process so far will be successful.

A. Administration:

Administration is a debt solution implemented by 5IR whereby the clients current debt instalments are reduced and the credit providers receive a debt repayment once every three months. It is a legal process whereby the debt repayment terms are extended, but the downside lies with the fact that the process is lengthy and takes much longer than debt counselling.

• Interest rates are only reduced to 15.5%

• The terms of the repayments are extended indefinitely

• Payments are only distributed every 3 months (interest adds up)

• Is only applicable for debts that total less than R50 000

• The fees are 12.5% + VAT + distribution costs per month

• Clients payment often becomes a salary deduction, so your employers will find out

Sequestration:

Sequestration is another debt solution . The process entails selling an individuals current assets in order to pay off or lessen their current debt. In addition to this, the court will appoint someone to manage the clients money and thus, it is an expensive process.

• Clients are forced to sell all their personal assets eg. home, car, furniture, valuables.

• The process will cost clients at least R20 000 in legal fees

• Sequestration is not an option unless it is in the credit providers’ best interests, thus the client needs to offer at least 15% of what they owe

• Rehabilitation is only possible after a period of five years.

Debt Review: 

Debt review is a debt management solution implemented in order to assist South African consumers with solving their debt problems. The process of debt review will ensure that the client’s debt repayment plan is extended and their current interest rates are reduced. The following information sums up the debt review process:

• We will restructure your debt after assessing your financial situation

• We will negotiate your debt repayments with credit providers

• Debt repayments are consolidated into one affordable monthly repayment, paid to an NCR regulated payment distribution agency

• Debt repayment terms are extended

• Once debt repayments have been made, credit bureaus will be notified and credit records will be adjusted.

• Banking fees are reduced and costs are cut, saving you money.

Debt review, administration and sequestration are all solutions targeted at solving the debt problems South African consumers currently face.