A staggering 10 million South Africans who use credit are finding it difficult to keep up with their debt repayments.
If you are among them, you are likely familiar with the relentless emails, calls, letters, and SMS reminders demanding immediate payment.
But what if a creditor is still hounding you over debt you can barely remember, or you see an old, unpaid account on your credit report?
Did you know that ” the really old debt” could be prescribed debt, and it’s important to know that it’s unlawful for creditors to demand payment on prescribed debt.
So, what exactly is prescribed debt, how does it work, and what are your rights as a consumer? Let’s explore everything you need to know.
Simply click on any topic in the table of contents below to get started.
Table of Contents
What types of Debt is written off?
How to Check If Your Debt Has Been Prescribed
Prescribed Debt and Debt Collection Laws in South Africa
Your Rights Against Debt Collectors
What is Prescribed Debt in South Africa?
Prescribed debt refers to debts that have passed a certain time limit, after which the borrower is no longer legally required to pay the debt amount owed.
Under the Prescription Act 68 of 1969, a debt becomes prescribed if the following conditions have been met for three years:
- You have not acknowledged the debt, either verbally or in writing.
- No payments have been made towards the debt.
- No summons have been issued or delivered to you regarding the debt.
It’s Important to Note: Credit providers won’t notify you when your debt becomes prescribed. Whether your debt qualifies depends on the type, how much time has passed, and what actions were taken by the creditor during the prescribed period.
What Type of Debt is Written Off?
Most consumer debt falls under contractual credit agreements, including:
- Store accounts
- Credit card accounts
- Personal loans
- Gym memberships
- Cell phone contracts
- School Fees
If you haven’t made any payments or acknowledgments for more than a period of three years, and there has been no attempt by the credit provider to collect or take legal action, they lose the right to demand payment.
Which Debt has a longer prescription time period?
- Home loans: Debts regarding your home loan are prescribed after 30 years.
- SARS: Any money owed to the South African Revenue Service (SARS) also has a 30-year prescription period.
- Municipal rates and taxes: Rates and taxes owed to your municipality are prescribed after 30 years.
- TV licences: Debts related to unpaid TV licences are prescribed after 30 years as well.
These debts fall under the longer prescription period as outlined in the Prescription Act 68 of 1969.
Not sure if your debt is prescribed or long-term?
How to Check If Your Debt Has Been Prescribed
If you think a debt has been prescribed, you can file a dispute with the relevant credit bureau.
- Request a dispute reference number to track your case.
- The credit bureau is required to investigate and respond within 20 business days.
- If you don’t receive a response within the 20-day window or are unhappy with the outcome, you can escalate the issue to the Credit Ombud for any further assistance.
How Do Creditors Stop Debt from Prescribing?
The Prescription Act ensures fairness for both consumers and creditors. While letting debt lie dormant might seem tempting, it can lead to more harm than good.
Ways Creditors Legally Interrupt Prescription
- Sending payment reminders
- Contacting you via email, SMS, or calls
- Taking legal action to prevent the debt from prescribing
Acknowledging Debt or Making Payments
Your debt is NOT prescribed if you’ve made any acknowledgment of the debt or any payment within the prescribed period.
- The debt remains valid and you are still responsible for paying it.
- In such cases, it’s in your best interest to negotiate a repayment plan with the creditor to settle the outstanding amount.
What are Your Rights Against Debt Collectors?
In March 2015, a new law regarding the prescription of debt came into effect. This law specifies that any debt that has been prescribed under a credit agreement can no longer be pursued by either the creditor or a debt collector.
Key Changes Introduced by the 2015 Debt Prescription Law
- The debt cannot be sold to another party for collection.
- Before 2015, it was the responsibility of the consumer or debtor to invoke prescription as a defence if a creditor attempted to collect on an old debt.
- If the debtor failed to raise this defence, they would still be liable for the full amount, along with any additional interest and costs associated with the debt.
This change was a significant shift in protecting consumers from being pursued for debts that had legally expired.
Section 126B of the NCA and Prescription states:
- (1)(a) No person may sell a debt under a credit agreement to which this Act applies and that has been extinguished by prescription under the Prescription Act, 1969 (Act 68 of 1969).
- (b) No person may continue the collection of, or re-activate a debt under a credit agreement to which this Act applies-
- (i) which debt has been extinguished by prescription under the Prescription Act, 1969 (Act 68 of 1969); and
- (ii) where the consumer raises the defence of prescription, or would reasonably have raised the defence of prescription had the consumer been aware of such a defence, in response to a demand, whether as part of legal proceedings or otherwise.
How do you Raise Prescription as a Defence?
Debt collectors often use tactics to pressure consumers into paying, even when the debt is prescribed. This is called “interrupting prescription.”
If you believe a debt is prescribed and a debt collector is demanding payment, you can raise the prescription as a defence. Refuse to make any payments until they provide evidence that the debt is still active. Always document your communication using emails or letters, and ask them to provide:
- The original loan agreement
- Proof of default
- The outstanding balance
- Total interest and costs incurred
- Evidence of attempts to contact you within the prescribed period
Take the First Step Toward Financial Relief
Don’t wait until your financial situation becomes unmanageable. The sooner you reach out to us, the sooner we can protect you from legal action and give you the financial relief you need.
If you’re feeling overwhelmed by debt, know that we’re here to help you every step of the way.