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.
21 September 2016
Seasons come and seasons go. Spring is here and it’s time for a fresh start for your finances. You know that 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.
What is prescribed debt?
‘Old debt’, also referred to as ‘prescribed debt’, is debt that you still owe a lender, but because there has been no activity or any real attempts from a lender to contact you in connection with the debt for a period of three consecutive years, it ceases to exist.
How do I know that debt is prescribed?
- If the debt is more than three years old and the credit provider did not demand payment of the debt.
- You have not received summonses to pay the debt by a creditor in three consecutive years.
Examples of debt which can become prescribed
If the correct rules are followed, the following are examples of debt which can become prescribed:
- Cellphone accounts
- Gym memberships
- Personal loans / Pay day loans
- Credit card accounts
- Retail accounts
Note: Not all accounts can become prescribed. Your home loan, TV licence, municipal accounts and debt owing to SARS are excluded.
Raising your defence
If a credit provider contacts you regarding prescribed debt, you must defend yourself by stating to the credit provider that it is illegal to demand payments on prescribed debt. The National Credit Act Amendments clearly state that it is illegal to demand payments on prescribed debt.
Tip: Do not sign any documents or admittance letters that may cause the reinstatement of the old debt.
Spring clean your credit report
You should check your credit report to see if prescribed debt is not reflecting on your credit report. If your credit report shows prescribed debt, then you need to contact credit bureaus. The credit bureaus will do an investigation in 20 business days within which the information about prescribed debt must be removed from the credit report. Alternatively, you can contact the credit provider concerned and request them to remove information pertaining to prescribed debt from your credit report.
Give yourself a fresh start, spring clean your finances.