It hasn’t been a good year for firms and attorneys who specialise in debt collection.
There was that sensational Western Cape High Court judgment earlier this month which exposed shamefully abusive practices in the “garnishee” orders industry, but the industry’s annus horribilis kicked off months ago, on Friday March 13, to be exact.
That’s the day the amendment to the National Credit Act (NCA) came into force, delivering several “wins” for debt-trapped South Africans, including the outlawing of the collection or selling of prescribed debt, and the automatic, free removal of credit bureau “blacklistings” when a debt is paid.
The consumers’ gain is the debt collecting industry’s considerable loss, so it’s no surprise that some have devised ways to keep debtors coughing up.
The collection of prescribed debt had grown into a massive industry, with collectors buying books of written-off debt from credit providers for “a few cents in the Rand”, inflating those written-off amounts with many years worth of interest and costs, and then tracking down consumers and badgering them to pay debts which most barely remembered.
If, in the previous three years, a debt hasn’t been acknowledged, no payment has been made, and no summons issued, it has prescribed and the debtor is no longer liable to pay it.
(Note: Home loan and all government-related debts only prescribe after 30 years.) Prior to March 13, though, if a consumer didn’t know about the defence of prescription, and made a promise to pay, or a payment, they were locked into paying the entire inflated debt.
So prescription was only a protection for clued-up consumers.
But the March amendment changed that, making it illegal for a company to sell a prescribed debt, or to collect a debt which has prescribed: it’s no longer up to the consumer to know about the Prescription Act in order to raise it as a defence and thus avoid paying an old debt.
This applies to all credit agreement-related debt – car and home loans, credit card accounts, store accounts and the like – which accounts for the vast majority of debts in SA.
Predictably, some debt collectors have come up with creative ways to get around this revenue killer.
Take the case of Stephan du Plessis. He is being contacted via SMS and phone in relation to a prescribed debt, by collectors Vertex Solutions – part of the Nimble Group.
“When I complained, they responded with an email detailing procedures that I have to follow to claim prescription.”
The Nimble Group argues on its website that “where the credit provider can prove that the consumer was… made aware of the defence of prescription and did not raise the defence of prescription, the re-activation and continued collection of prescribed debts is not prohibited.”
That explains the information on its website about prescription and the “Submit Prescription Claim” icon.
To my mind, that interpretation clearly seeks to defeat the intention of the amendment.
The National Credit Regulator agrees.
“Whether the consumer knows about the prescription defence or not, the debt has prescribed and there should be no collection or re- activation of it,” a spokesman said.
“It is clear that the debt collector is circumventing the application of this provision… and misleading consumers.”
The NCR will be “dealing with” this case.
Vertex Solutions has not responded to my emailed query.
CONTACT WENDY:
E-mail: wendy@knowler.co.za
Twitter: @wendyknowler
Before March 13 this year, if you had an adverse listing, or “blacklisting” on your credit record with a bureau, even if you paid the debt, that listing remained there for a set amount of time - five long years in the case of a judgment - effectively blocking you from getting any new credit.
Now, thanks to the NCA amendment, if you pay the debt in full, the “blacklisting” must be automatically removed from your credit bureau record - without you having to do anything, or pay anything further.
But some attorneys appear to be confusing consumers who have paid their debts off, and are desperate to be rid of the “blacklisting”, by telling them they still need to pay them a hefty fee to have the judgment rescinded.
Leigh-Ann Phaal of Durban had two joint debt judgments with her husband, which they paid up in April.
“My attorney said that as the judgment was taken in December last year, we don’t qualify to have it rescinded free, and that we had to pay R400 for letters advising the debt was paid if full, and a further R4000 to remove the judgment.
Asked to comment, deputy Credit Ombud Reana Steyn said it was immaterial when judgment was taken - the new law states that judgment information must be removed from the credit bureau once paid up – period.”
The judgment will remain in the court file, she said, but if nobody knows about it, it should not matter - it’s the credit bureau listing which impacts the consumer.
“My advice to this and other consumers is to first check if the judgment still reflects on their names at the bureaus. If so, they can contact the credit bureau and lodge a dispute about the judgment information, sending them the proof of settlement.
“If the bureau does not remove the info, then the consumer can contact us (Credit Ombud) and we will ensure that it is done.” Bottom line - don’t get suckered into paying thousands to have a debt judgment rescinded.
Plotting to rob consumers of prescription protection
There was that sensational Western Cape High Court judgment earlier this month which exposed shamefully abusive practices in the “garnishee” orders industry, but the industry’s annus horribilis kicked off months ago, on Friday March 13, to be exact.
That’s the day the amendment to the National Credit Act (NCA) came into force, delivering several “wins” for debt-trapped South Africans, including the outlawing of the collection or selling of prescribed debt, and the automatic, free removal of credit bureau “blacklistings” when a debt is paid.
The consumers’ gain is the debt collecting industry’s considerable loss, so it’s no surprise that some have devised ways to keep debtors coughing up.
The collection of prescribed debt had grown into a massive industry, with collectors buying books of written-off debt from credit providers for “a few cents in the Rand”, inflating those written-off amounts with many years worth of interest and costs, and then tracking down consumers and badgering them to pay debts which most barely remembered.
If, in the previous three years, a debt hasn’t been acknowledged, no payment has been made, and no summons issued, it has prescribed and the debtor is no longer liable to pay it.
(Note: Home loan and all government-related debts only prescribe after 30 years.) Prior to March 13, though, if a consumer didn’t know about the defence of prescription, and made a promise to pay, or a payment, they were locked into paying the entire inflated debt.
So prescription was only a protection for clued-up consumers.
But the March amendment changed that, making it illegal for a company to sell a prescribed debt, or to collect a debt which has prescribed: it’s no longer up to the consumer to know about the Prescription Act in order to raise it as a defence and thus avoid paying an old debt.
This applies to all credit agreement-related debt – car and home loans, credit card accounts, store accounts and the like – which accounts for the vast majority of debts in SA.
Predictably, some debt collectors have come up with creative ways to get around this revenue killer.
Take the case of Stephan du Plessis. He is being contacted via SMS and phone in relation to a prescribed debt, by collectors Vertex Solutions – part of the Nimble Group.
“When I complained, they responded with an email detailing procedures that I have to follow to claim prescription.”
The Nimble Group argues on its website that “where the credit provider can prove that the consumer was… made aware of the defence of prescription and did not raise the defence of prescription, the re-activation and continued collection of prescribed debts is not prohibited.”
That explains the information on its website about prescription and the “Submit Prescription Claim” icon.
To my mind, that interpretation clearly seeks to defeat the intention of the amendment.
The National Credit Regulator agrees.
“Whether the consumer knows about the prescription defence or not, the debt has prescribed and there should be no collection or re- activation of it,” a spokesman said.
“It is clear that the debt collector is circumventing the application of this provision… and misleading consumers.”
The NCR will be “dealing with” this case.
Vertex Solutions has not responded to my emailed query.
CONTACT WENDY:
E-mail: wendy@knowler.co.za
Twitter: @wendyknowler
Before March 13 this year, if you had an adverse listing, or “blacklisting” on your credit record with a bureau, even if you paid the debt, that listing remained there for a set amount of time - five long years in the case of a judgment - effectively blocking you from getting any new credit.
Now, thanks to the NCA amendment, if you pay the debt in full, the “blacklisting” must be automatically removed from your credit bureau record - without you having to do anything, or pay anything further.
But some attorneys appear to be confusing consumers who have paid their debts off, and are desperate to be rid of the “blacklisting”, by telling them they still need to pay them a hefty fee to have the judgment rescinded.
Leigh-Ann Phaal of Durban had two joint debt judgments with her husband, which they paid up in April.
“My attorney said that as the judgment was taken in December last year, we don’t qualify to have it rescinded free, and that we had to pay R400 for letters advising the debt was paid if full, and a further R4000 to remove the judgment.
Asked to comment, deputy Credit Ombud Reana Steyn said it was immaterial when judgment was taken - the new law states that judgment information must be removed from the credit bureau once paid up – period.”
The judgment will remain in the court file, she said, but if nobody knows about it, it should not matter - it’s the credit bureau listing which impacts the consumer.
“My advice to this and other consumers is to first check if the judgment still reflects on their names at the bureaus. If so, they can contact the credit bureau and lodge a dispute about the judgment information, sending them the proof of settlement.
“If the bureau does not remove the info, then the consumer can contact us (Credit Ombud) and we will ensure that it is done.” Bottom line - don’t get suckered into paying thousands to have a debt judgment rescinded.
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