Debt prescription claims & the Credit Amendment Act

Amendments to the National Credit Act (NCA), gazetted on Friday 13 March 2015, will make it impossible for unscrupulous debt collectors to collect debt that has prescribed (expired).

The changes to the act means that if a consumer had not acknowledged a debt for more than three consecutive years, either verbally or in writing, the debt is considered prescribed and has effectively lapsed.

Neil Roets, CEO of debt management company Debt Rescue said consumers should note that if they have made any payments within those three years, the debt remained valid.

“You should also not have promised to pay. The creditor should also then not have summonsed you for this debt within three consecutive years,” he said.

“We have seen a slew of last-minute attempts by debt collectors and creditors to collect debt that had long since prescribed in the hope of beating the implementation of the new law.”

He expects the new amendments to have a significant effect on the use of emolument orders or, as they are more commonly known, garnishee orders, because many of the debts that these orders had been issued for had long since prescribed.

The buying and selling of prescribed debt between companies, who specialised in hunting down consumers whom they knew had no cause to repay their debt because it had prescribed, was big business before the introduction of the amendments.

Debt review remained the best option for deeply indebted consumers whose debt had not prescribed and who had to repay their outstanding liabilities.

“Once a consumer has been placed under legal debt review, their belongings are safe and may not be attached by debt collectors. It also gives them breathing space to pay back their debts over a longer period of time thus reducing repayments.”

A major benefit for indebted consumers is that the amended act now states that credit providers are not allowed to take legal action against a debtor once a court date had been set to place him or her under debt review.

“This strengthens the hand of debt counsellors in protecting consumers and makes debt review the procedure of choice for consumers to lighten their debt load.”

Among the other changes made by the amendments is that it also significantly increases requirements for affordability assessments done by lenders before granting loans to consumers.

“This is going to make unsecured credit much more difficult to access for cash-strapped consumers,” he concluded.

For more information, go to www.debtrescue.co.za.

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