Prescribed Debt – Everything You Need to Know!
Have you ever been in a situation where an old debt that you’ve considered as cleared suddenly resurfaced? As if on cue, debt collectors start to hound you like you’ve done something criminal when it was the creditor in the first place that forgot to remind you of existing debt obligations.
Don’t worry because you may be eligible to claim a prescribed debt on forgotten loans, so long as you meet the conditions for it.
What is the prescribed debt?
A prescribed debt is a debt that has lapsed the period for it to be repaid, and the creditor hasn’t acknowledged it for three years or more.
When is debt eligible to be deemed prescribed?
When a debt remains unpaid after a specific number of years has elapsed, and the creditor didn’t demand payment or pursue any legal proceeding, the debt can be counted as ‘prescribed’.
Essentially, the debt gets cancelled and the creditor loses their right to demand repayment.
How long before debt is prescribed?
The prescription period isn’t fixed as it depends on the type of loan. According to the National Credit Act, here are the prescription periods for the following debt types:
- Contractual debts – 3 years
- Cheque debts and promissory notes – 6 years
- Land leased debt and land purchase debt – 15 years
- Tax-related debts and mortgage bonds – 30 years
Telkom accounts, mobile phone accounts, and gym memberships can also be counted under prescribed debts.
The prescription period starts as soon as the due date of a debt ensues.
In case you prevent the creditor from gaining knowledge about the debt, the prescription period will start the moment the creditor acknowledges the existence of the debt.
Prescribed debt eligibility and exemptions
As a debtor, you must repay loans on time. Failing to do so deems you liable for the repercussions and legal actions associated with breaching loan terms. However, it’s also not right for creditors to demand payment for several years if they fail to collect it on time.
The 2015 amendment to the National Credit Act made it illegal for creditors and debt collectors to collect repayments once a debt has been declared as prescribed unless they can present proof that the debt isn’t prescribed yet.
If you believe a debt can be prescribed, ask for your credit report from the leading credit bureaus in South Africa. After this, you can contact your provider and request any proof that they tried to contact you to prevent debt prescription. If they can’t provide any, then you can request a debt prescription.
However, there are instances when the prescription period can be stopped. Prescribed debts may not be awarded in the following situations:
- Making repayments toward the debt
- Being outside the borders of South Africa
- Creditor taking legal action on the debt
- Debtor is found to be a minor, under curatorship, or diagnosed as insane
- The debt is being disputed in an arbitration procedure
- You’re married to or are a business partner with the credit provider
While it’s unlawful for creditors to collect payment from a prescribed debt, it’s also illegal to claim a prescription without acknowledgment from the creditor.
It’s tricky to get a debt prescription. It can be requested from your creditor, so long as you don’t acknowledge the debt. You must request to remove prescribed debts from your credit record without agreeing to claim the debt.
The prescription period won’t count if you force the prescription by avoiding contact with the creditor. The creditor must be at fault and initiate the non-contact for the loan to be eligible for prescription.
Your creditor is the primary contact that can provide debt prescription. If they fail or refuse to do so, you can contact any of the credit bureaus in SA to help investigate your request. They can have the prescribed debt removed from your credit record within 20 days of approval.
Know your rights
Debt collectors are notorious for dealing with prescribed debts. Collecting prescribed debts have a very good return on investment for them, which is why they try their best to harass South Africans even if it’s against the law.
If you’re not familiar with the rights awarded to you by the NCA 2015 amendments, you’ll easily give in to debt collectors and pay the prescribed debt. Even if you know your rights, debt collectors can be forceful and confuse you with legalese by saying that claiming a prescription doesn’t exempt you from paying the debt in full.
To quench all your worries, keep this in mind: once a debt has been prescribed, you no longer have any obligation to repay it. Any outstanding debt will be extinguished, and nothing can reverse it; not creditors, and certainly not debt collectors. It is against the law for any of them to ask for payment from you.
Stand your ground and request proof that your debt is not prescribed. Never sign, acknowledge, or pay anything.
If you acknowledge or make a payment toward the prescribed debt, you’ll forfeit your right to claim for a prescription. You’ll be liable again for the debt, including all the interest and fees accrued throughout the years.
If they keep on harassing you, make sure that you record the conversation or phone call with them, so you’ll have proof to back your claims. Additionally, you can get legal and professional advice from registered SA consultants who can help you deal with the situation and put an end to the harassment.
Prescribed debt is a fair way to clear a forgotten debt obligation, especially when it’s the creditor’s fault to follow-up on the repayments. Debt prescription also shields you from harassing debt collectors who may trick you to pay a loan that’s already been legally cleared because of creditor negligence.
When you have a prescribed debt, it’s highly recommended that you keep a record of it to prevent debt collectors from harassing you to repay the loan later. Know your rights so that you won’t succumb to the manoeuvres of creditors and debt collectors to force you to acknowledge an expired debt.
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