Do you need to pay old debt in South Africa?

Do you still have to pay old debt? Not always. If a prescribed period has passed, and the debt falls under the National Credit Act (NCA), your creditor may no longer have the legal right to demand payment.

What is prescribed debt? 

Prescribed debt is debt that is no longer payable because, for the duration of the prescription period (commonly, three years):

• You have not acknowledged the debt, verbally or in writing
• You have not made any payments towards the debt
• The creditor has not contacted you or taken legal action against you

Prescription only applies under the above circumstances.

It’s important to note that not hearing from your creditor because you changed your address or have not read your mail does not absolve you of legal responsibility. You still have to pay your debt if your creditor has been trying to reach you without success.

The Prescription Act 68 of 1969 stipulates time limits for different categories of debt – from three years for most contractual claims, to 30 years for home loans.

Debt that prescribes after three years or more includes:

• Credit card debt
• Personal loans
• Retail accounts
• Cell phone contracts
• Electricity accounts
• Gym contracts
• School fees

Debt that prescribes after 30 years includes home loan debt, rates and levies, television license accounts, and taxes.  

Does prescribed debt have any consequences?

Although you’re not legally obliged to repay prescribed debt, not doing so may have unintended consequences. Let’s examine what some of these may be.

Impact on your credit score

Prescribed debt should not be listed on your credit report, but if there is any misunderstanding or error, the debt may be flagged as unpaid by credit bureaus. This can then have a negative impact on your credit score.

Paying the prescribed debt will remove it from your credit report more quickly, which may be beneficial if you want to apply for a loan, for example.

Attempted legal action

There are no legal consequences for not paying prescribed debt that falls under the ambit of the NCA, because it becomes unenforceable at the end of the prescription period.

However, a creditor or debt collector may still attempt to take legal action against you to recover money owed.

They may try to issue a summons, hoping you will be unable to defend it. If this happens, you’ll need to consult a legal expert. You can also log a complaint with the National Financial Ombud Scheme.

Action by debt collectors

Even when debt has prescribed, a creditor or debt collector may try to recover it. This is, however, illegal and contrary to the stipulations of the NCA.

If you’re harassed for payment, do not acknowledge the debt or make any payment, however small. Doing this will restart the prescription period and you’ll be liable for payment.

A creditor or debt collector will need to prove their case by submitting the original credit agreement, proof of default, the outstanding balance, total interest, and costs incurred, and evidence that they have tried to contact you within the three-year period of prescription.

If they can’t do this, they won’t be able to prove the debt isn’t prescribed.

What to do if you think your debt has prescribed

If you think your debt may have prescribed – or need guidance regarding outstanding debt – there are several steps you can take.

Review your credit report and dispute the debt

Request your credit report from a credit bureau – you’re entitled to one free report a year from each bureau. The four main credit bureaus in South Africa are Experian, TransUnion, VeriCred Credit Bureau (VCCB), and Xpert Decision Systems (XDS).

The report should help you identify any prescribed debt that may be listed. You can then contact the relevant credit provider and request that they remove the debt. If they refuse, contact the credit bureaus to dispute the debt.

If this proves unsuccessful, the next step is to contact the National Credit Regulator or National Financial Ombud Scheme.

Consult a debt counsellor

A debt counsellor can guide you regarding your debt, and let you know if any of it has prescribed.

If you’re struggling with debt, a debt counsellor can also review your finances and, if you’re overindebted, draw up a new repayment plan combining multiple debts into one manageable monthly repayment amount.

They can also negotiate with your credit providers to reduce your interest rates and prevent them from taking legal action against you – your creditors can’t sue you, garnish your salary, or repossess assets as you have legal protection. As such, debt counsellors can also protect you from bankruptcy.

Debt counselling may be the best solution for you if you’re unable to repay your debt.

DebtBusters can help you understand prescribed debt

DebtBusters, South Africa’s leading debt management company, offers guidance and resources to help you understand and manage your debt.

Our debt experts are equipped to provide information on prescription periods and the potential consequences of not repaying your debt, and can determine when debt is no longer legally payable.

In addition, DebtBusters can review your outstanding debt, check if any has prescribed, and help you make the right decisions regarding prescribed and due debt.

Collecting prescribed debt is illegal

As mentioned, it’s illegal for a creditor to attempt to collect prescribed debt. If a creditor or debt collector tries to do this, do not acknowledge it. If you do, you’ll become liable for the debt.

Instead, obtain a copy of your credit report and contact DebtBusters to check whether any of your debt has prescribed.

If a creditor approaches you illegally, contact:

• The Council for Debt Collectors: call 012 804 9808, email info@cfdc.org.za, or visit www.cfdc.org.za and submit a complaint
• The National Credit Regulator: call 0860 627 627 or email complaints@ncr.org.za
• The National Financial Ombud Scheme: call 0860 800 900, email info@nfosa.co.za, or submit a complaint online.

Fill out the form below for a free call-back from one of our consultants to discuss your debt situation.