A debt is prescribed after three years of no payment and no acknowledgement of the debt by the consumer.
PeopleImagesA News24 Business reader considering prescribing her debt looks to an expert for guidance. She writes:
How I go about beginning a process where my debt can be prescribed?
Tej Desai, CEO of Alefbet Collections & Recoveries responds:
What is the Prescription Act?
Prescription is a legal principle in which a debtor's liability to pay an outstanding debt is extinguished after passing prescribed time periods. A debt is prescribed after three years of no payment and no acknowledgement of the debt by the consumer.
Prescription applies when the debtor has not, during such prescribed period, in any way acknowledged their liability to pay such debt. Suppose the creditor served a summons during the prescribed period or where the debtor acknowledges liability. In that case, the prescription period will be interrupted and will start to run afresh from the date on which the summons was served or the liability acknowledged.
According to the Prescription Act 68 of 1969, debt is prescribed if during the past three years:
If, however, the credit grantor gets a judgment on the debt against you, they have the right to collect from you for 20 years.
It is imperative to understand that not all debts prescribe after the three years. In terms of chapter 3 of the Prescription Act, certain categories of debt are set out with specific timeframes of prescription, which are:
Examples of debt under the National Credit Act include:
It is still legal for creditors to demand payment or call consumers to get them to acknowledge a prescribed debt and even sue on a prescribed debt for agreements falling outside the National Credit Act.
If within the ambit of the National Credit Act (NCA) "credit agreements" such as banking loans - the creditor is legally not entitled to pursue any debt if prescribed, irrespective of whether the debtor has acknowledged, made a promise or a payment.
So, the debtor can successfully raise prescription as a defence for credit agreements that fall within the NCA. Additionally, because it's illegal for creditors under the NCA to pursue prescribed debt, it is not a requirement for the debtor to raise prescription as a defence, the onus lies on the credit provider to prove otherwise.
It is, however still legal for creditors to demand payment/ call debtors to acknowledge a prescribed debt and even sue on a prescribed debt for agreements falling outside of the NCA. Here, if debtors have merely acknowledged the debt (without paying), they will not be successful in raising prescription as a defence in court.
What does it mean for you?
If you believe that your debt has become prescribed, you must inform the credit granter (or collections company) accordingly.
Your claim of prescription will be assessed, and if found that the debt has in fact, prescribed:
If a debt still appears on your credit profile, but you believe it is prescribed, challenge this by logging a dispute with the relevant credit bureau. Ensure you are provided with a dispute reference number and allow the bureau to investigate your dispute within 20 working days. Should the credit bureau not respond to you after the 20 working days, or should you not be happy with their outcome, you may then contact the Credit Ombud for further assistance.
Questions may be edited for brevity and clarity.
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