Some South Africans are indebted to the point where they can longer afford the monthly instalments for their debts.

Many consumers would rather deal with debt collectors than their creditors due to the lower instalments debt collectors might agree to. However, there are many underlying factors regarding debt collection fees that you may not be aware of. Gerald Rodrigues, director GGR Assist, and Perry De Jager, head of collections and recoveries solutions at Principa Decisions, explain.

You are liable for the costs

Debt collectors may be the ones who are calling and sending you letters and text messages, but you are the one who is paying for the costs of those. On top of that, you pay 10% collection commission on every payment you make, as well as default interest.

The older your debt, the more you pay

The costs of debt collection depend on the stage of the debt. Older debt will attract more costs than new debt.

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You pay more than you owe

Even though the Debt Collectors Act limits the fees a debt collector can charge, you can find yourself paying more than you owe to your creditors. For instance, if you owe R3,000 at default, you can end up paying R6,000 because of default costs, fees and interest.

Debt collectors charge less than lawyers

There is no cap on the fees that attorneys can charge for debt collection, therefore it is often better to deal with a debt collector than a lawyer.

Debt Collectors normally fulfil the function of “soft collections”, meaning their aim is to collect debt through communication (call centres, letters, emails etc).

Lawyers normally fulfil the function of “hard collections”, meaning their aim is to collect debt through the legal process (summons, judgment etc.) which has a much higher cost implication for the debtor than “soft collections.” However, some lawyers provide a dual service of both “soft” and “hard” collections.

Once your debt is handed over, you can never reverse it

Often these debts are sold to a third party, in which case it would not be possible to reverse it. However, you can prevent the handover by making repayment arrangements with your creditor before it happens.

Debt Collectors are regulated by the Association for Debt Collectors (ADRA) and lawyers by the Law Society. You can contact both entities to lodge a complaint regarding overcharged costs.

This article has been prepared for information purposes only and it does not constitute legal, financial, or medical advice. The publication, journalist, and companies or individuals providing commentary cannot be held liable in any way. Readers are advised to seek legal, financial, or medical advice where appropriate.