New amendments to The National Credit Act (NCA), gazetted by government, change the way in which debt collectors can collect prescribed debt from consumers. The selling and the collection of prescribed debts resulting from credit agreements are now prohibited by the NCA. This brings relief to consumers who find themselves with prescribed debt, as prescribed debt can no longer be collected by anyone.
“A debt is considered as ‘prescribed’ if in the past three years the debtor has not made a payment or acknowledged the debt (in writing or verbally), has not received a summons or made a promise to pay off the debt,” explains Ian Wason, CEO of DebtBusters.
Before the new laws came into effect it was not illegal for debt collectors to harass consumers about prescribed debt. It was up to the consumer to be knowledgeable about their rights and to raise prescription as a defence. However, this is now no longer necessary.
A history of bullying tactics
The collections industry has mushroomed thanks to buying loan books comprising of prescribed debts from other financial institutions. Lenders sold these books off to debt collection businesses as it is more profitable for them to sell off debtors’ books than writing them off as bad debts.
The draft amendments released in 2014 caused a debt collections frenzy which quickly spiralled out of control, as debt collectors became aware that selling and collecting prescribed debts would soon be prohibited.
Debt-enforcement agents resorted to tactics such as harassing consumers, the fraudulent use of emolument orders forcing employees to make deductions off employees’ salaries, confiscating borrower’s bank cards, identity documents and PIN codes to withdraw cash from accounts themselves, all in order to collect debts that have expired under the Prescription Act.
Collectors tried all the tricks in the book to get consumers to acknowledge their prescribed debt to interrupt the prescription which meant consumers had to pay back their debt said Wason. “We have seen a drastic increase in the amount of debt counselling applications over this period of time, as cash strapped consumers threatened by unscrupulous collectors have turned to us for help.”
Dealing with the harassments
What can you do if you are harassed by debt collectors over prescribed debt? It’s important to be aware of your rights firstly and it’s essential not to acknowledge the debt until it can be determined what that debt is for, where it comes from and how old it is.
Alternatively, Wason advises borrowers who are struggling with debt repayments and harassed by debt collectors should turn to a reputable debt counsellor for help. Debt counsellors can identify prescribed debt, advise the consumer about their prescribed debt and negotiate with the credit provider to get the prescribed debt written off.
“DebtBusters is geared up and ready to assist consumers that continue to be harassed by debt collectors of prescribed debt,” adds Wason. “We anticipate a further increase in the amount of debt counselling applications, as a result of the holistic changes to the NCA.”
Wason points out that before debt counselling, DebtBusters clients spend more than 105% of their net income servicing their debt. After DebtBusters has renegotiated their debt with credit providers, consumers generally spend only 30-40% of their net income on debt repayments.”