Your guide to prescribed debt

By Jessica Anne Wood

When neither you nor the company that you owe the money to has acknowledged the debt for a specified number of years it becomes prescribed debt. Salem Dyafta, brand manager for consumer at TransUnion, explained: “A prescribed debt means a debt (for example payment of money) that is extinguished after the lapse (passing) of a time period.”

The law

The Prescription Act 68 of 1969, details the law with regards to various prescriptions, including prescribed debt. According to the Act, “a debt shall be extinguished by prescription after the lapse of the period which in terms of the relevant law applies in respect of the prescription of such debt.”

Dyafta revealed: “The Prescription Act 68 of 1969 sets out different provisions which specify time periods for various debts. In general the contractual and delictual debts extinguish after three years from when prescription starts.”

What are the periods of prescription for debt?

According to the Prescription Act the following periods of prescription apply:

a)      A period of 30 years is applicable to “any debt secured by mortgage bond; any judgment debt; any debt in respect of any taxation imposed or levied by or under any law; any debt owed to the State in respect of any share of the profits, royalties or any similar consideration payable in respect of the right to mine minerals or other substances.”

b)      A period of 15 years applies to “any debt owed to the State and arising out of an advance or loan of money or a sale or lease of land by the State to the debtor, unless a longer period applies in respect of the debt in question in terms of paragraph (a).”

c)       After a period of six years “a debt arising from a bill of exchange or other negotiable instrument or from a notarial contract, unless a longer period applies in respect of the debt in question in terms of paragraph (a) or (b)” becomes prescribed.

d)      A period of three years applies to all other debt, unless an Act of Parliament provides otherwise.

Your prescribed debt

“You will not be informed that a debt has been prescribed. A consumer would have to ensure that they know the date from when prescription begins to run and furthermore if any action has been taken by the consumer or the creditor which has interrupted the running of the prescription,” explained Dyafta.

Nthupang Magolego, senior legal advisor executive at the National Credit Regulator (NCR), elaborated: “Consumers should determine whether or not their debts have prescribed by checking the last date when payment of the debt was made, the last date when any express or tacit acknowledgement of the debt was made, or the date the consumer received court documents from a credit provider demanding payment of the debt, as all these must take place before the lapse of the applicable prescription period.”

When you have a prescribed debt, it should not appear on your credit report. Dyafta clarified: “In terms of the National Credit Amendment Act and Regulations, a prescribed debt is prohibited from being listed on a consumer’s credit report. The listing of a prescribed debt by a credit provider or other source to a credit bureau is an offence which carries with it a fine of up to 10% of annual turnover.”

Magolego added: “In terms of the provisions of the NCA, prescribed debt must not be loaded on a person’s credit bureau records.”

Once a debt is prescribed, a creditor provider can attempt to enforce its right to collect the debt. However, Dyafta pointed out that the debtor “may raise prescription as a complete defence to the creditor’s claim which means that he is not legally obliged to settle the debt.”

“The NCA does not allow a creditor to collect prescribed debt, and doing so will be regarded as a prohibited conduct and the necessary enforcement action will be taken against such a credit provider. Consumers have a right to refuse to acknowledge or pay any prescribed debt and must report companies that are demanding payment to the NCR,” elaborated Magolego.

While a debt can be prescribed, Dyafta emphasised that prescription can be interrupted or delayed by certain events. “Furthermore, if the debtor prevents the creditor from gaining knowledge of the debt (excluding debts arising from agreements) prescription runs from when the creditor has knowledge of the existence of the debt,” added Dyafta.

 

 Handy tip: If you are struggling with debt, you can apply for debt counselling through Justmoney.

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