Prescribed Debt: Everything You Need to Know

Almost 42% of credit-active consumers are struggling to pay their debts according to the latest 2020 industry figures. If you are one of them, then you probably know all too well what it’s like to be overrun with emails, calls, letters and SMS’s reminding you to pay your debt. 

But what if you are still being hounded by a creditor, demanding payment on a debt you can hardly even remember? Or you noticed an account you have not paid for years still on your credit report. Maybe you know you can’t pay your debt, so you’re hoping for a way out…eventually. 

Well, that really “old debt” could be prescribed debt. And it is unlawful for a creditor to demand payment of prescribed debt…

So what exactly is prescribed debt, how does it work and what are your rights as a consumer? Read on and find out everything you need to know about prescribed debt.

What does it mean when debt is prescribed?

Prescribed debt is the term used to describe all consumer debts that are past the prescribed time period where the borrower is still liable for their debt by law.

Debt such a credit card or personal loan and can only be prescribed after 3 years. A mortgage bond and judgement debt (debt where legal action was taken) can only be prescribed after 30 years. 

If your credit provider has not made efforts to secure payment, taken legal action, or failed to communicate with you in the prescribed time, the money owed becomes prescribed debt. In other words, it’s expired and can be legally written off.

You will not be notified whether or not you have prescribed debt. 

Whether your debt is prescribed depends on what type of debt it is, how long has passed and what legal actions were taken in an attempt to recover the debt during the prescribed time period. 

What type of debt is written off in 3 years?

The majority of consumer debt lies in contractual credit agreements:

  • Store accountsOverdrafts
  • Credit card accounts
  • Personal Loans
  • Payday Loans
  • Gym memberships
  • Cell phone contacts
  • Home broadband & landline contacts
  • Vehicle finance

If you owe money on any of these types of debts for more than three years with no paper trail or proof, then the credit provider loses the right to take action against you regarding this debt ever again. 

Prescribed debt and debt collection laws in South Africa

How do creditors lawfully stop debt getting prescribed?

The Prescription Act has laws in place to ensure this process is fair to both the consumer and the creditor. Therefore, it is not advisable to let debt lie dormant for a long period. In fact, it causes more harm than good. Keep reading and you’ll find out why.

The credit provider has the right to interrupt and extend the prescribed time period. They generally make every effort possible to ensure debt does not become prescribed.

Creditor providers have the right to take legal action against you for any amount of debt owed if you have defaulted. This legal action results in blacklisting, damaging your chances of getting credit in the future and for as long as the debt remains payable.  

Even if you have not physically received any notification of legal action taken, it can still be served. This usually happens when you have changed address and you failed to update your details with the credit provider. 

And remember, if you don’t pay the debt even after legal action has been taken, you will still be liable for it for another 30 years depending on whether the process has been interrupted again. That’s a long time to wait to wait before you can clear your name…

Your debt has NOT been prescribed if you have made any acknowledgement of the debt or made any payment towards the debt within the set time period. Finally, leaving the country and living outside of South Africa’s borders for any period of time will pause the prescribed time period, meaning you will still be liable for that debt when you return.

Occasionally creditors will sell their debt to debt collectors who will try to collect the outstanding debt from consumers. When this happens the debt collectors take on ALL the outstanding debt including interest, debt amount, recovery cost, legal fees etc. 

Debt collectors will demand that you pay your debt in full along with the additional costs. This amount will therefore be significantly higher than your original debt. Ouch…

Consumer rights against debt collectors

Debt collectors will try to find any loopholes where they can to persuade you to pay up and interrupt the prescription period. This is called “interrupting prescription”.

If you’re being harassed, or if someone is demanding that you pay debt that you believe is prescribed, you can raise the prescription as defence. You should also refuse to make any payment until they provide evidence that the debt is not prescribed. You’ll have to document your communication, so use emails or letters when communicating. Request them to stop harassing you or to provide proof that the debt is not prescribed. 

They will need to provide:

  • The original loan agreement 
  • Proof of the default 
  • The outstanding balance 
  • Total interest and costs incurred
  • Evidence that they have tried to contact you within the three-year prescribed period. 

How Long Does it Take for debt to be written off in South Africa?

Conclusion

If you are struggling to meet your monthly repayments and are currently being harassed by creditors, it’s better to take action than to shy away from your obligations. Credit providers have strict processes in place to stop debt from being prescribed. The National Credit Act has put various debt relief measures in place for over-indebted consumers. Debt Review is one of those solutions.

Over the years debt review, also known as debt counselling, has been highly effective at helping struggling consumers from ending up in more financial trouble. If you would like to know more about the process, get in touch with one of our expert consultants today.

2 responses to “Prescribed Debt: Everything You Need to Know

  1. Hi Johan

    Yes, you can. To qualify for debt review you’ll need to be employed and have at least R40,000. As long as you’re earning an income you’ll qualify.
    Please provide us with your contact information. One of our friendly consultants will get back to you as soon as possible. They will answer any question you may have.

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