Beware recycling of old debt

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Cape Town - As long as consumers remain in the dark about old debt, debt collectors will continue to collect millions of rands from consumers who are not legally bound to repay, warned Fin24 debt expert, Moeshfieka Botha.

The correct term for this old debt is prescribed debt.

What exactly is prescribed debt? According to the Prescription Act 68 of 1969, section 10 (1), a debt  is prescribed if:

* You have not acknowledged the debt in the past 3 consecutive  years, either in writing or verbally
* You have not made any payment towards  the outstanding amount, nor have you promised to pay
* The creditor has not summonsed you for this debt within 3 consecutive years

In many cases, the debt had been written off by the initial credit provider, but debt collectors buy it for virtually nothing, said Botha.

There is nothing unlawful about a debt collector calling you to collect on a prescribed debt. But the onus is on the consumer to know their rights in this regard, she said.

Prescribed debt is normally followed up many years after the initial debt was incurred, said Botha, adding that the request for payment is often accompanied by a threat to blacklist the consumer if the debt is not paid.

This threat carries no weight, as a prescribed debt may not be listed on your credit profile at a credit bureau.

A Fin24 user recently told of how debt collectors were harassing him for debt incurred 10 years ago.

A typical example of prescribed debt:

* In 2005 you owed a creditor R2 000. In 2013, a debt collector calls you and says that with interest and admin costs, you now owe R10 000.
* The first thing you should do, is find out when last payment was made on the account.
*  Then ask the debt collector if a summons was ever issued for this debt.
*  If no payment has been made on that account for 3 consecutive years and no summons has been issued for that debt within the last 3 years, then that debt is prescribed and you are not legally bound to repay that debt.

Once you've mentioned to a debt collector that you know your debt had been prescribed and that you are aware that you are not legally bound to pay it, they should  leave you in peace, said Botha.

"If a debt collector pursues even after you have told them of the prescription, ask them to supply you with a full statement of your account including all payments made. They should also clearly point out where you have made a payment in the last three years.

"As a consumer, you have the right to a detailed statement when you request it."

Whatever you do, do not make an arrangement to pay an old debt because this revokes the prescription even if the arrangement to pay is done verbally, Botha warned.

A home loan (bond), municipal accounts, monies owed to Sars and your TV license cannot become prescribed debt.

But retail accounts, credit cards, Telkom accounts, personal loans, gym memberships, cellphone accounts, monies owed on vehicle finance ALL become prescribed after no payment was made or any summons issued within 3 consecutive years.

- Fin24

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