Skip to main content

Consumers score big as collecting old debt is illegal

| Economic factors

Amendments to the National Credit Act making it illegal to collect prescribed debt has contributed to the big drop in civil summonses and judgments for debt, James O’Haughey, CFO of Intelligent Debt Management Group, told Fin24 in a studio interview.

"The National Credit Regulator has been quite active in the industry," he said.

The latest figures from Stats SA showed that the total number of civil summonses issued for debt decreased by 13.4% in the first quarter of 2016 compared with the first quarter of 2015.

The largest contributions to the 13.4% drop were civil summonses relating to money lent (contributing -7.6 percentage points);  ‘other’ debts (contributing -3.1 percentage points); and services (contributing -1.3 percentage points).

The total number of civil judgments recorded for debt fell by 11.2% and the total value of the judgments slipped by 5.8%.

O’Haughey expect these figures to continue to fall as the selling and the collection of prescribed debts resulting from credit agreements are prohibited by The National Credit Act.

Watch the interview

 

 

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

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

The amendment last year brought relief to thousand of indebted consumers.

"It is now illegal to collect prescribed debt and that has had quite a big impact in terms of credit providers to collect through the courts.

"There has also been a lot more education in terms of consumers, which has led to credit providers not needing to collect through judgments," said O’Haughey.

Although there has been a significant decline in civil summonses and judgments, he added that credit providers are using debt counselling as a method of debt collection.

"It is a very good process because we as debt counsellors look at all the debt of a consumer; and their financial situation so it is a very effective tool."

Pin It

Related Articles

South Africans are resilient people who are always ready to seek solutions for problems, even if the trials they face are caused by events that are beyond their control. An empowering example of this approach to life is the use of grocery stokvels...
In response to rising food costs, The SPAR Group offers practical tips for beating food inflation through savvy shopping and creative cooking.
By: Myles Illidge – MyBroadband South Africa’s Road Accident Fund (RAF) tax and General Fuel Levy (GFL) add between R272 and R483 to the price of a tank of fuel, depending on the size of your car’s tank.
By: Shaun Jacobs – Daily Investor Major changes are coming to VAT in South Africa, with the government looking to expand the range of food items exempt from the tax. 
By: Hanno Labuschagne - MyBroadband An anticipated strengthening of the rand and slipping global oil prices could result in lower petrol prices at the pumps next month.