Ever hear of debt mediation?
It’s not the same as debt counselling. Though it is marketed as a debt ‘solution’. A way out of debt…but is it actually a good idea?
Let’s find out.
We’ll explain what it is, how it compares to debt review, and why picking the right path matters.
Debt mediation
What is debt mediation?
Debt mediation is an informal process where a mediator (middleman) helps you and your creditors agree on easier repayment terms without going to court. It’s not recognised by the National Credit Act, so it offers no legal protection, unlike debt review. Creditors can still take legal action, and agreements aren’t legally binding unless all parties cooperate. Debt mediation can work for short-term financial issues, but it is risky unless the process is handled by a trusted provider.
Basically, it is an unofficial service (not recognised by the National Credit Act) that helps consumers negotiate with creditors.
What is VDMS?
In 2013, credit providers launched the Voluntary Debt Mediation Solution (VDMS) as a lighter alternative to debt review. Today, most credit providers have moved on. Now, either offering debt counselling directly or partnering with registered debt counsellors who can legally restructure debt.
How does it work?
Debt mediation is a voluntary process where a mediator works with you and your creditors to adjust your monthly repayments and ease financial pressure. Unlike debt review, it’s not a formal legal process. That means creditors have to cooperate, and the mediator’s skill determines whether they’ll be able to negotiate fair terms.
How debt mediation works:
- You or a mediator approach your creditors to renegotiate terms.
- Creditors voluntarily agree (or refuse) to adjust your repayments.
- You make reduced monthly payments based on the new terms.
- No legal protection is in place if creditors change their minds or take action.
- There’s no court order or official record of the agreement.
Now, let’s zoom in on the law.
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How debt mediation fits into South African credit law
Debt mediation and VDMS are not governed by the National Credit Act, and service providers offering these solutions are not regulated by the National Credit Regulator. This lack of oversight means:
- There’s no legal obligation for creditors to accept your new payment plan.
- You’re not legally protected from legal action like repossession or court judgments.
- There’s no set fee structure, so some providers may charge high or unclear fees.
On the other hand, debt review is a legal, structured process under the NCA, with NCR-registered debt counsellors and legally enforceable repayment plans.
Advantages and disadvantages of debt mediation
Debt mediation can sound appealing because it’s flexible and doesn’t involve the courts, but it comes with real risks.
Advantages of debt mediation
- ✅ Flexible terms: Payment plans can be adjusted to match your financial situation.
- ✅ No formal debt flag: You’re not officially listed as undergoing debt counselling.
Disadvantages of debt mediation
- ⚠️ No legal protection: Not recognised by the NCA—no protection from creditors or legal action.
- ⚠️ Voluntary for creditors: Lenders can refuse the plan or take legal steps at any time.
- ⚠️ No clearance certificate: Even if you settle your debts, there’s no formal proof for credit record clean-up.
- ⚠️ Risk of scams: Many unregulated operators offer mediation without accountability.
If it works, great. But if it doesn’t, you could be worse off than when you started.
Debt mediation vs debt review
Debt mediation and debt review are both aimed at helping South African consumers manage their debt, but they work very differently. Debt mediation is informal and unregulated, while debt review is a formal legal process protected by South African law.
Here’s a side-by-side comparison:
| Feature | Debt mediation | Debt review |
| Regulated by NCR | ❌ No | ✅ Yes |
| Protection from legal action | ❌ Not guaranteed | ✅ Yes (once court order is granted) |
| Voluntary for creditors | ⚠️ Yes (creditors can refuse) | ✅ No (legally binding once approved) |
| Impact on credit record | ⚠️ No formal flag, but arrears may show | ⚠️ Flagged as under debt counselling |
| Clearance certificate issued | ❌ No | ✅ Yes (upon full repayment) |
| Cost transparency | ⚠️ Varies—often unclear | ✅ Regulated by NCR fee guidelines |
Debt review may be stricter, but it provides a clear legal process. Once your repayment plan is approved by the court, your creditors must stop legal action. Your assets—like your house or car—are protected as long as you keep up with payments. And since debt counsellors must be registered with the NCR, there’s a layer of protection that prevents scams.
What is your estimate? *The calculation is an estimate actual amounts may vary. What is your estimate? *The calculation is an estimate actual amounts may vary.
Try our debt reduction calculator to calculate your lower monthly debt instalment*.
Try our debt reduction calculator to calculate your lower monthly debt instalment*.
Why most South Africans prefer debt review
While debt mediation offers flexibility, most South Africans choose debt review because it gives legal protection and long-term structure. Once your debt review plan is approved by the court, your creditors can’t repossess your assets, like your house or car, or take legal action, as long as you follow the plan (otherwise, debt review may be terminated).
Debt review is also trusted because it’s regulated and transparent. That means fewer scams. All debt counsellors must be registered with the NCR, and their fees follow strict guidelines. This makes it easier for consumers to know what to expect, with fewer chances of being taken advantage of.
Another key reason is the clear end goal. After paying off your restructured debts, you receive a clearance certificate, and your credit report is updated. This gives you a fresh start—something debt mediation doesn’t formally offer.
So while mediation might seem “easier” upfront, debt review gives you long-term peace of mind.
⭐ Related content:
- Debt counselling vs debt review – what is the difference?
- What is debt management, and how does it work?
- All the disadvantages of debt review (debt counselling)
Final thoughts
Debt mediation might look like a quick fix, but it’s often not enough when the stakes are high.
If your situation calls for structure, legal protection, and a clear path forward, debt review is the stronger choice.
Take action today. Talk to a registered debt counsellor and choose the solution that puts your financial future first.
Want to talk to someone about managing your debt? We can help. Try our online assessment at My Debt Hero to see if you qualify to reduce your debt.
