Prescribed debt can no longer be touched

By Staff Writer
Nicolette Dirk, finance writer, Justmoney.co.za
 
A ‘loophole’ in the present Prescription Act for debt, that many debt collectors use to get consumers to pay old debt, will now officially be closed thanks to the National Credit Amendment Bill .The new legislation will make it illegal to collect debt that is older than three years old.
 
In one of the clauses in the National Credit Amendment Bill, credit providers are prohibited from selling prescribed debt that resulted from a credit agreement. Prescribed debt is when the debtor is no longer viable for payment. This clause is due to be signed into law by the President. 
 
In the original Prescription Act the prescription was deemed interrupted when you are approached by a debt collector and acknowledge the debt.
 
According to the Act should this happen, prescription shall run afresh from the day you acknowledge the debt.
 
How did some debt collectors take advantage of this Act?
 
Prior to the new amendment, making a collection on prescribed debt was not illegal and some debt collectors used unscrupulous ways to get indebted consumers to pay up.
 
Paul Slot, president of the Debt Counsellors Association of South Africa (DCASA), said that some debt collectors would call up unknowing people, with prescribed debt, and promise to sort out the query at a certain fee.
 
As soon you pay anything towards this debt, it is no longer prescribed and credit providers could once again demand the old debt , plus interest. 
 
“With the new Bill this will no longer take place because it will be illegal for credit providers to sell any prescribed debt to debt collectors and consumers won’t be approached to pay prescribed debt,” said Slot.
 
Wikus Olivier, from DebtSafe, said that some debt collectors would even take people’s ID’s as a way to intimidate them to pay.
 
Some debt collectors would force an unknowing debtor to sign a form he/she does not understand and in this way you consent to judgment and the collector would get a garnishee order on your salary at the court.
 
When a committee meeting was held  earlier this year to discuss the negotiating mandates on the National Credit Act (NCA) Amendment Bill, Zodwa Ntuli, Department of Trade and Industry deputy director-general , said the issue was around protecting consumers from being harassed by people they did not know or enter into an agreement with.

She said this was done with the thought that many consumers were illiterate, semi-literate or just not versed in the law and it was an obligation of parliament and government to protect the consumer from being abused.
 
What will this mean for the consumer?
 
Olivier said that consumers need to be aware that affordability assessments will be strictly enforced.
“When you apply for credit the process will be regulated and credit providers will have to do more research into who is applying for a loan. Prior to this, credit providers approved a loan based mainly on the information they got from the credit bureau,” said Olivier.
 
He added that with credit clearance clauses like the National Credit Amendment Bill and the credit amnesty, indebted consumers will not have to wait for long periods to get back into the credit market once they cleared their debt.
 
But this does not mean that you are no longer responsible for your debt. Olivier said that once you have been issued with a summons, the amendment bill cannot help you.

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