Within minutes of my short piece on a prescribed debt case being published last week, my inbox was awash with e-mails from people desperate for more information.
Some were being hounded for old debts and had heard about prescription for the first time; for many of them too late, having already caved in to pressure and started paying.
It’s an odd piece of legislation, the Prescription Act. It was intended to incentivise credit providers and their collectors to collect debts from lapsed payers quickly, rather than sit on them for years, then track down and lean on people to pay a debt which by then had been bloated with interest and costs.
In many cases the bank or retailer wrote the debt off and sold it on to a debt collector for a song, and that collector – or possibly the one they sold it on to – is collecting for their account, not that of the bank, retailer or gym.
And it’s not uncommon for collectors to harass people to pay debts to companies which don’t exist anymore, such as Cuthberts and Health & Racquet Club.
So here’s how prescription works, in a nutshell: if, in the past three years, you have not acknowledged a debt in any way, such as promising to pay at a future date; made a payment or been summonsed in respect of it, you can pull out your prescription trump card and refuse to pay.
However, if, like many thousands of consumers, you’ve never heard of prescription, and you either admit to once owing that company money; promise to pay later, or go ahead and make a payment, you forfeit your right to claim prescription.
Collectors often trick people into cancelling their right to claim prescription, such as asking, “So if you won the Lotto, would you pay?” A yes answer is regarded as an acknowledgement of the debt.
One collector sends SMSes to alleged debtors, asking them to “pay R95 within 48 hours and get your credit score”. If they pay that relatively small amount, their prescription defence is gone.
Incidentally, you’re entitled to one free credit bureau check a year.
It’s not illegal for credit providers or collectors to attempt to collect prescribed debt; it’s up to the consumer to raise prescription as a defence, and when they do, their files should be closed.
Often the collectors don’t give up that easily – they keep up their demands for payment, insist that the debtor provides proof of prescription or instruct their target to “send us a prescription order” from court.
National Credit Regulator spokesman Lebogang Selibi told me last year that, strictly speaking, it was true that only when a court has made a ruling that the debt has prescribed, will the prescription defence be enforceable, but practically, once an alleged debtor raised prescription as a defence, debt collectors stop collecting.
Many people cave because they are threatened with “blacklisting” – an “adverse listing” on one’s credit profile, which prevents you from being granted further credit.
Here’s the thing – the National Credit Act prohibits the listing of prescribed debt, so that’s an empty threat.
- When the National Credit Amendment Act is signed into law, it will be illegal for prescribed debts relating to credit agreements – bank and car loans, for example – to be sold or collected.
The Association of Debt Collectors has argued that as a result, credit providers will be forced to be more “aggressive” in chasing debts, flooding the courts with summonses which would lead to emoluments attachment orders and the attachment of assets.
Not all debt prescribes in three years. A 30-year prescription period applies to mortgage bonds, any judgment debt, and any debt in respect of taxation imposed or levied by or any other law, including municipal rates, traffic fines and TV licences.WHAT TO DO
In Your Corner is not advocating that people don’t pay their debts. Of course it is wrong not to.
But it’s also wrong for a collector to contact a consumer many years after an alleged default, and demand that they pay a sum which they cannot or will not substantiate.
And with half of South Africa’s 19 million credit-active consumers currently being three months in arrears, money is best spent on current debt rather than old, inflated debt.
So this is what I suggest you say if you get a call or SMS about a debt which has been dormant for more than three years:
“The alleged debt has prescribed. Unless you can prove otherwise, please close my file and don’t harass me again.”
Do that in writing, so that you have a record of it.
If they persist, as with any other debt demand, ask to see the original contract, proof of the date of default, the handover amount and a break-down of all the costs and interest which has accrued since.
If they can’t provide any of that, tell them you’ll see them in court.
Contact: consumer@knowler.co.za or Twitter: @wendyknowler
Prescribed debt: it pays well to know your rights
Some were being hounded for old debts and had heard about prescription for the first time; for many of them too late, having already caved in to pressure and started paying.
It’s an odd piece of legislation, the Prescription Act. It was intended to incentivise credit providers and their collectors to collect debts from lapsed payers quickly, rather than sit on them for years, then track down and lean on people to pay a debt which by then had been bloated with interest and costs.
In many cases the bank or retailer wrote the debt off and sold it on to a debt collector for a song, and that collector – or possibly the one they sold it on to – is collecting for their account, not that of the bank, retailer or gym.
And it’s not uncommon for collectors to harass people to pay debts to companies which don’t exist anymore, such as Cuthberts and Health & Racquet Club.
So here’s how prescription works, in a nutshell: if, in the past three years, you have not acknowledged a debt in any way, such as promising to pay at a future date; made a payment or been summonsed in respect of it, you can pull out your prescription trump card and refuse to pay.
However, if, like many thousands of consumers, you’ve never heard of prescription, and you either admit to once owing that company money; promise to pay later, or go ahead and make a payment, you forfeit your right to claim prescription.
Collectors often trick people into cancelling their right to claim prescription, such as asking, “So if you won the Lotto, would you pay?” A yes answer is regarded as an acknowledgement of the debt.
One collector sends SMSes to alleged debtors, asking them to “pay R95 within 48 hours and get your credit score”. If they pay that relatively small amount, their prescription defence is gone.
Incidentally, you’re entitled to one free credit bureau check a year.
It’s not illegal for credit providers or collectors to attempt to collect prescribed debt; it’s up to the consumer to raise prescription as a defence, and when they do, their files should be closed.
Often the collectors don’t give up that easily – they keep up their demands for payment, insist that the debtor provides proof of prescription or instruct their target to “send us a prescription order” from court.
National Credit Regulator spokesman Lebogang Selibi told me last year that, strictly speaking, it was true that only when a court has made a ruling that the debt has prescribed, will the prescription defence be enforceable, but practically, once an alleged debtor raised prescription as a defence, debt collectors stop collecting.
Many people cave because they are threatened with “blacklisting” – an “adverse listing” on one’s credit profile, which prevents you from being granted further credit.
Here’s the thing – the National Credit Act prohibits the listing of prescribed debt, so that’s an empty threat.
The Association of Debt Collectors has argued that as a result, credit providers will be forced to be more “aggressive” in chasing debts, flooding the courts with summonses which would lead to emoluments attachment orders and the attachment of assets.
WHAT TO DO
In Your Corner is not advocating that people don’t pay their debts. Of course it is wrong not to.
But it’s also wrong for a collector to contact a consumer many years after an alleged default, and demand that they pay a sum which they cannot or will not substantiate.
And with half of South Africa’s 19 million credit-active consumers currently being three months in arrears, money is best spent on current debt rather than old, inflated debt.
So this is what I suggest you say if you get a call or SMS about a debt which has been dormant for more than three years:
“The alleged debt has prescribed. Unless you can prove otherwise, please close my file and don’t harass me again.”
Do that in writing, so that you have a record of it.
If they persist, as with any other debt demand, ask to see the original contract, proof of the date of default, the handover amount and a break-down of all the costs and interest which has accrued since.
If they can’t provide any of that, tell them you’ll see them in court.
Contact: consumer@knowler.co.za or Twitter: @wendyknowler
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