These schemes are designed to unknowingly enrol individuals into a formal debt review programme, making them ineligible for future vehicle finance.

Explaining the concerning trend, Brandon Cohen, NADA Chairperson, stated: “South Africans are increasingly receiving unsolicited calls from organisations offering debt relief services. By participating in a brief survey and answering a series of questions with a simple ‘yes’, consumers may find themselves enrolled in a debt-review programme without giving explicit consent.”

Debt review is a legal process designed to assist over-indebted consumers. It involves debt counsellors, who get paid for their services, assessing the applicant’s financial situation and negotiating with creditors to restructure their debt into a more manageable repayment plan. However, as he points out: “The debt review programme, once approved, becomes a court order to which the applicant must adhere until debts are fully settled.”

Noting that debt review plays a significant role in assisting consumers who find themselves in a debt-spiral, the decision to enter formal counselling must not be taken lightly, and a range of options also need to be explored, such as speaking to the banks or a financial advisor.

The debt review process is not a quick-fix and can be protracted, lasting several years depending on the consumer’s debt obligations. During this period, an individual under debt review will not be able to obtain any new credit.

Being under debt review also has a lasting impact on an individual’s credit record and credit score. Even after the process is complete, a debt review note on a consumer’s credit report can make it difficult to secure new credit at an affordable rate.

In the automotive industry, NADA has observed a rise in car finance application rejections owing to buyers being under debt review. To avoid this, Brandon advises consumers to remain vigilant when speaking to agents who offer debt relief services.

“Do not consent to anything you do not fully understand and until you have had a chance to think about it. Ensure that debt review is the right option by conducting independent research and only make use of the services of registered debt counsellors with a proven positive track record. We also recommend using caller identification software to help avoid these unsolicited calls that can lead to the debt review trap,” he says.