In South Africa, the term ‘prescription debt’ refers to old or expired debt, i.e. debt that a debtor is no longer obliged to pay off because it had not been acknowledged over a specified period.
If a credit provider does not demand payment from you, start legal action against you or communicate with you in any way within the specified period, a debt becomes prescribed. That means it has essentially been cancelled and the credit provider loses his right to claim payment on the debt.
The purpose of prescription is to ensure that credit providers and debt collectors collect money owed to them within a specified period and do not delay recovery of funds to such an extent that it accumulates massive amounts of interest and costs.
Unscrupulous debt collectors take over this type of debt specifically because it is so difficult for creditors to recover. For the collector, there is a higher return on investment when collecting prescribed debt because the interest, recovery costs, legal fees, etc. are all added to the outstanding debt amount.
What does the law say?
The National Credit Amendment Act, published 13 March 2015, prohibits the sale and collection of prescribed debt.
In addition, the Prescription Act 68 of 1969, which was enacted in South Africa in 1968, enforces the regulation of prescription and states that debt can be considered as prescribed if the following requirements occur:
A credit provider has not claimed payment, sent a letter of demand or issued a summons.
A consumer has not made any payments or acknowledged the debt directly or indirectly for the time periods specified below:
Advice on prescribed debt in Cape Town, South Africa
Personal loans, PAY-DAY loans, Telkom accounts, credit cards, retail accounts, and vehicle loans – 3 years
Mortgage loans, TV Licenses, judgement debts by court orders and money owed to the South African Revenue Service (SARS) – 30 years
What are my rights in terms of prescribed debt?
If a debt has been dormant for the specified period, a debt collector cannot ask you for payment. It is against the law if they do.
If you suspect that someone is harassing you and demanding payment from you on a prescribed debt, raise prescription as a defense and refuse to make payment until the debt collector provides evidence that the debt is not prescribed.
When does prescribed debt not apply?
The credit provider can provide reasonable evidence that they tried to contact you during the prescription period.
You acknowledge the debt, or make a payment on the debt.
The creditor takes legal action against you.
You are residing outside South Africa.
You are married to, or business partners with, the credit provider.