PROPERTY & INVESTMENT
default and have not paid their liability to the scheme . Unless collection takes place , the scheme will in essence remain indebted to the lender ad infinitum .’
A debt trap ?
Roos warns that the levy finance product could become a debt trap . His company offers an alternative , which they refer to as ‘ debt purchase ’. He explains how it works : ‘ The debt is analysed in accordance with our risk model and an offer is made to the scheme to take over the debt of the scheme at an agreed value . For example , if a scheme has an outstanding debtors ’ book of R1,000,000 , then we would analyse the book taking into consideration various factors such as the age of the debt , the value of the property , whether or not the property is bonded , and various other factors .
‘ We would then individually analyse each debtor and debt and then make an offer per debtor on such debt . Using the example above , let ’ s assume our risk assessment model indicates that we offer a payout of R600,000 in exchange for the R1,000,000 of outstanding levies .
‘ This would result in an overall offer on the total book , but if a scheme only requires assistance in respect of a
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