Seasons come and seasons go. Spring is here and it’s time for a fresh start for your finances. You know that old, old debt that you have almost forgotten about but still lingers in the back of your mind? Well, it is important to know that you may not have to pay that debt back anymore. This is due to a legal clause known as prescribed debt.
27 May 2016
South Africans have for many years been exposed to unending credit obligations, with many of them finding it difficult to make payments. Credit providers would have attempted to collect on any unpaid debt for a period of time. At a point however, they would make the decision to hand over or sell the debt to debt collection companies to collect for them. Regardless of how old the debt was, these companies would aggressively chase payment from consumers. In many cases, they would be chasing debt that the consumer was not even aware of. This debt was often older than three years and had no paper trail or proof that the individual had acknowledged the debt to begin with.
The amendments of the National Credit Act passed in March 2015 has changed the way these debt collection companies are allowed to work by providing a clear decree on Prescribed Debt in South Africa.
Sadly, more than a year down the line, consumers are still not aware of what the National Credit Act says on Prescribed Debt, leaving them exposed to credit collecting companies.
DebtBusters can help you to understand prescribed debt
If you have not been contacted by the credit provider either by way of summons or obtaining a judgment against you within a period of 3 years after you defaulted on paying your account, then your debt has prescribed. For at least three years, since the date that your outstanding debt was due, there must have been no acknowledgment of the debt by you and no contact made by creditor for the debt, whether by summons, letter of demand or by phone.
In other words, if you were not aware of the debt and had never been contacted by the credit provider to repay the debt for three consecutive years of the debt being due or of the last instalment that was made, then, your debt has become prescribed and legally, you do not have to repay the debt.
There is one exception; if the debt is government debt or a home loan, it only becomes prescribed after 30 years, instead of three.
Collecting debt that has prescribed is illegal
Before the amendments of the NCA, it was common for consumers to be chased for prescribed debt. The NCA amendments that came into effect in March last year declared the collection of prescribed debt to be illegal.
Where consumers have been contacted by debt collectors or third party agencies on behalf of a credit provider asking for payment on old potentially prescribed debt, consumers should not acknowledge the debt in question. Acknowledgement of the debt would break the cycle of prescription, making you liable for the debt again. If you are contacted for old debt, take down the details of who is calling and which company they represent. If your debt is prescribed, you need to report them to the NCR on 0860 627 627.