THE FACTS ABOUT PRESCRIBED DEBT

The effect of the Amendment to the National credit act that came into force on the 13^th day of March 2015 regarding prescribed debt.............

Prescription, in terms of debt, is when a debt expires after a certain period of time which is usually three years. The result hereof is that the debtor is no longer regarded as owing the debt and the creditor may not initiate legal action to collect this debt.  This is now specifically prohibited in terms of this amendment. In terms of the Prescription act 68 of 1969 consumers could raise the defense of prescription when a credit provider instituted legal proceedings after a period of three years had lapsed.

 (It was not uncommon for creditors to trick consumers into acknowledging their commitment in terms of the debt and then collect on the acknowledgement.  It is now totally illegal to do this)  The regulatory Compliance Amendment Act 9 (13 March 2015) has included an additional section in the Act that specifically deals with prescription and which has shifted the onus from the consumer to the creditor and has placed a restriction on credit providers or any other person who collects debt.  Section 126B of the Amendment Act provides that no person may sell any debt under a credit agreement to which the NCA applies, where such debt has prescribed. Furthermore, a person may not continue to collect such debt or proceed with the re-activation of such debt where the debt has prescribed and where the consumer has raised or would reasonably have raised prescription as a defense. 

Until the wording of the act is challenged in court and case law comes into force contradicting this the wording is very clear.  Even if you acknowledged a prescribed debt previously and made arrangements to pay on this and have been paying on this –  Creditors will be in default after 13 March 2015 to accept payment from you and I am sure that you will be successful in claiming such payments back if you now raise the defense of prescription.  

iN THE CASE OF KAKNIS v ABSA BANK LTD AND ANOTHER 2017 (4) SA 17 (SCA) IT HAS SINCE BEEN ESTABLISHED THAT THE ACT DOES NOT WORK RETROSPECTIVELY AND THAT THE ASSUMPTION I MADE ABOVE IS NOT APPLICABLE. iT WILL ONLY BE APPLICABLE AFTER THE DATE OF IMPLEMENTATION  WHICH IS 13 march 2015 .  ANY ARANGEMENT THAT WAS THUS MADE BEFORE THIS DATE WILL STAND AND IS STILL ENFORCEABLE 

The Amendment Act has provided protection to consumers in this regard due to a consumer most likely being unaware of the provisions of the Prescription Act No. 68 of 1969 and their rights in terms of this Act. Therefore, credit providers should be aware of the prescription periods of debt and ensure that debts are recovered before they prescribe. It should be noted that the prescription period of three years does not apply to mortgages as the prescription period for mortgages is 30 years. It also does not apply to license fees and payment for services to municipalities, tax and other payments to the state.

The actual wording in the act reads as follows:

The following section is hereby inserted in the principal Act after section 126A:
‘‘Application of prescription of debt - 126B. 

(1) (a) No person may sell a debt under a credit agreement to which this Act applies and that has been extinguished by prescription under the Prescription Act, 1969 (Act No. 68 of 1969).

(b) No person may continue the collection of, or re-activate a debt under a credit agreement to which this Act applies— 

(i) which debt has been extinguished by prescription under the Prescription Act, 1969 (Act No. 68 of 1969); and 
(ii) where the consumer raises the defence of prescription, or would reasonably have raised the defence of prescription had the consumer been aware of such a defence, in response to a demand, whether as part of legal proceedings or otherwise.’’