Debt Vader Talks Virtual Arrears

As the Debt Counselling industry evolves, it becomes more and more evident that credit providers treat Debt Re-arrangement Court Orders as inconsequential, even going so far as to ignore the court orders by refusing to update their internal computer systems to reflect the restructured debt as per the Debt Re-arrangement Court Order, and placing themselves intentionally in contempt of a valid and enforceable court order.

Thus the emergence of the “virtual arrears” which are arrears accumulated before the application for Debt Review and during the debt re-arrangement process. It is accepted that when a consumer enters the Debt Review process, any arrears that may have existed on their accounts is capitalised. The consumers are then expected to pay in respect of the Debt Re-arrangement Court Order, a specific amount of money to their Credit Providers, over a specific time and at a specific interest rate, all of which is documented and confirmed in the court order itself.

The unwillingness of the Credit Providers to change their internal computer systems to accommodate the new arrangement reflected on the Court Order, results in a deficit between the original contractual installment and the debt review installment (virtual arrears). This deficit expresses itself as an arrears amount which accumulates during the existence of the Debt Review and upon which the bank charges interest (which they are not entitled to), thus creating debt out of “thin air”.

In the instance where a consumer wishes to withdraw from the Debt Review process, the Credit Providers request a withdrawal form (17.4) issued by a Debt CounsellorD before they will entertain any request by the consumer. Once the withdrawal form has been issued, the consumer no longer enjoys the protection of the NCA and this places them in an unenviable bargaining position.

Some of the banks make ludicrous demands on consumers, they will demand that 50% of this “virtual arrear” be paid upfront, and that the other 50% is to be paid over 6 – 9 months, while the consumer continues to pay the normal contractual installment, thus making it impossible for a consumer to comply with the arrangement or to successfully exit Debt Review. The result being that the consumer could lose their property.

These”virtual arrears” seems to be how the banks calculate which consumer they are going to be harassing into higher installments (paid outside of the Debt Re-arrangement Court Order) or withdrawing from the Debt Review process. This harassment takes the form of constant sms’s, letters threatening the consumer with enforcement action and even premature terminations, or attempts to rescind the Debt Re-arrangement Court Orders. The higher the “virtual arrears” become the more high risk that consumer becomes and the more pressure the banks will place on the consumer, in some instances going so far as to summons consumers.

If you’re struggling with “virtual arrears” and feel overwhelmed by the demands of credit providers, it’s time to take control of your financial future. At Zero Debt, our certified debt counsellors are here to guide you through the complexities of Debt Review and help you reclaim your financial independence. Don’t let the burden of mismanaged arrears and relentless demands keep you from living a stress-free life. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. If you’re short on time, request a Free Call Back, and one of our expert counsellors will reach out to you. Take the first step towards debt freedom with Zero Debt today!

FAQs and Answers

1. What are virtual arrears in debt review?
   Virtual arrears refer to the difference between the original contractual instalments and the lower debt review repayments, often misrepresented as missed payments by credit providers.

2. Why do credit providers ignore court-ordered repayments?
   Many credit providers fail to update their systems to reflect court-approved debt arrangements, causing virtual arrears to accrue unfairly.

3. Can banks charge interest on virtual arrears?
   Banks should not charge interest on amounts covered by a court order, but some still do, generating debt from non-existent shortfalls.

4. What happens when I want to exit debt review?
   Exiting debt review usually requires a 17.4 withdrawal form, which removes your legal protection under the National Credit Act, weakening your negotiation power.

5. What are the risks of withdrawing from debt review?
   You could face unrealistic repayment demands, legal action, and even property loss if you withdraw from debt review without a viable plan.

6. Are banks allowed to harass consumers under debt review?
   No, but some use SMSs, letters, and threats to pressure consumers into making payments outside the court-ordered arrangement.

7. Can virtual arrears lead to premature termination of debt review?
   Yes, if virtual arrears are falsely interpreted as default, credit providers may initiate termination or court actions against consumers.

8. How can I protect myself from unfair virtual arrears practices?
   Working with an accredited debt counsellor ensures legal compliance and protection against abuse by enforcing your court-approved repayment plan.