Everything you need to know about prescribed debt

Misodzi Muswere, Summit Financial Partners
2016-06-19 14:23
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Cape Town - Debt doesn’t last forever. If a credit provider doesn’t claim payment on a debt, it will eventually fall away.

But when does a debt become prescribed? How long will it remain on your credit record? Can a prescribed debt be reactivated? And what should you do if someone demands payment on a debt you thought had prescribed? Summit Financial Partners has the answers.

When does a debt become prescribed?

If a credit provider does not demand payment from you, start legal action against you or communicate with you in any way for three years (or the applicable time period – see table below), a debt becomes prescribed. That means the debt is essentially cancelled and the credit provider loses his right to claim payment on the debt ever again.

Of course, this is on condition that you did not move or change your contact details, during the prescription period, without informing the credit provider. Prescription will not apply if the credit provider can provide reasonable evidence that they tried to contact you during the prescription period.

Will prescribed debts still show on your credit report?

Once a debt is prescribed, it must be written off by the credit provider and removed from your credit report.

If you find that a prescribed debt is still reflecting on your credit report, you have two options:

1. Contact the credit provider and request the removal of the prescribed debt from your credit profile.

2. Contact the major credit bureaus (Transunion, Experian, XDS, CompuScan) directly and lodge a dispute to request that they remove the prescribed debt from your credit profile.

The credit bureaus will have 20 business days to investigate. If no evidence is found that the credit provider attempted to contact you during the prescription period, the debt must be removed from your credit report at the end of the 20 business days.

Time periods for prescribed debt

Interruptions to prescription

Prescription will not apply if:

– You acknowledge the debt, or make payment on the debt

– The creditor takes legal action against you

– You are residing outside of South Africa

– You are married to, or business partners with, the credit provider

What if someone tries to collect on a prescribed debt?

Amendments to the National Credit Act (NCA) in 2015 made it clear that it is unlawful for any credit provider or debt collector to try to collect payment on a prescribed debt.

Sometimes, a credit provider will sell their prescribed debts to a debt collector who will then contact you, demanding payment. This is also unlawful.

If you suspect that someone is demanding payment from you on a prescribed debt:

1. Raise prescription as a defense and refuse to make payment until the debt collector provides evidence that the debt is not prescribed.

2. If the debt collector persists, without providing evidence, email fightback@summitfin.co.za or contact us on 087 806 1011.

*This article was originally appeared on Summit Financial Partners and is republished with their permission.

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