Payment distribution agent (PDA) DC Partner collects monthly payments from some 80,000 consumers and then distributes those payments to consumers’ creditors with which they have entered into debt review agreements.

According to the National Credit Regulator (NCR), South Africa’s four registered PDAs serve close to 300,000 consumers under debt review, and since the National Credit Act (NCA) came into effect credit providers have received more than R36-billion through the debt review process and via PDAs. 

PDAs fight for the consumer when things go wrong. “We are the last line of defence,” their marketing material claims. Normally, what happens is that when someone has spent too much on credit and can’t repay the loan, they have the option of going into a debt management scheme. If this happens, the debtor, often a retailer, hands over the debt to a PDA who collects the debt at a more affordable rate to the creditor, but usually over a longer time period. It costs the creditor more, but at least they avoid being listed as a credit risk.

In December 2019, DC Partner, South Africa’s second-largest PDA, was served with a Section 345 notice by the sheriff of the court, and the National Credit Regulator said one of the company’s service providers would proceed with a liquidation application against the distribution company for non-payment of service rendered.

Ubiquity AI was a service provider to DC Partner working on an AI pilot project to promote financial education on WhatsApp, when DC Partner was unable to meet its financial obligations – an issue that has been ongoing for more than two years. 

“Upon serving them with the Section 345 notice and informing the regulator accordingly in December, we were extremely shocked, concerned and became suspicious when DC Partner required us to give them assurances that the regulator will not investigate or audit them, as a condition to continue negotiations,” says Ubiquity AI co-founder and CEO Kaveer Beharee.

“The regulator, consumers and debt counsellors should be horrified and extremely concerned that an entity that collects millions of rands from consumers on a monthly basis will make demands to influence and stop regulatory oversight and compliance.” 

Ubiquity AI has since terminated its contract with DC Partner. 

“Our negotiations ended this week when DC Partner required an explicit undertaking that Ubiquity AI get the NCR off their backs and give them the assurance that the NCR will not investigate them,” says Beharee. 

Meanwhile, industry players have warned that consumers should exercise extreme caution if DC Partner is their service provider. 

Other parties close to the matter told Business Maverick that the NCR has known about this issue since December 2019, and has known about DC Partner’s financial woes for even longer. 

One source says: “The NCR did express [to me] its concern about the impact of a liquidation application against DC Partner on consumers, and specifically, the impact of the application on consumer funds being held in trust by DC Partner.”

Furthermore, legal experts state that, “while consumer funds will be ring-fenced and will not be affected by the application or ensuing action, we strongly recommended that the regulator conduct a thorough audit of DC Partner’s trust accounts and should immediately establish the financial position and viability of DC Partner as a going concern”. 

PDAs are the backbone of the debt review industry and are required to conduct market surveillance on behalf of the National Credit Regulator, collect and make payments on behalf of consumers and to resolve payment disputes between consumers and credit providers, if payments are made through their systems. 

The single biggest issue here is that thousands of consumers would continue to make payments to DC Partner at the risk of that payment not being received by the creditor. What happens if a consumer makes a monthly payment and PDA then goes bust?

In leaked emails of engagement between related parties including the NCR and the Department of Trade and Industry (Dti) on the DC Partner matter, stakeholders voiced their concerns regarding the looming liquidation and the potential treatment of trust accounts. 

“This issue is definitely in the public interest and I cannot and will not in good conscience allow hard-working, struggling consumers to make monthly payments in good faith to DC Partner, or let DC expect their monthly revenue, blissfully unaware of the precarious position DC Partner finds itself in,” one email states. 

“Furthermore, financial services companies like PDAs who are in a position of trust must be held to the highest standards. Consumers have a right to know that DC Partner is: (1) now facing liquidation, (2) is not financially viable, (3) it is not a company of integrity, or in a position to pay its debts. Consumers should be extremely cautious in dealing and making payments to this company.”

DC Partner did not want to comment on the matter.

It seems critical that the NCR exercise proactive regulatory oversight to determine the financial position of regulated companies like DC Partner that collect money from consumers. 

Furthermore, if pointed and public allegations are made against financial providers by industry insiders like Ubiquity AI, these allegations must be investigated by the NCR with haste, and until it provides clarity and the assurance that consumers are not under threat of losing their money, consumers and debt counsellors should exercise extreme caution in dealing with financially-struggling financial services providers.

So why isn’t it? NCR CEO Nomsa Motshegare and the deputy director-general of the Dti, Evelyn Masotja, have yet to provide Business Maverick with an answer to that question. BM