BANKS ARE STILL COLLECTING ON PRESCRIBED DEBTS

Your bank may be going after debt that is no longer owed

- REANA STEYN

THE LAW forbidding creditors from collecting on prescribed debts which fall under the National Credit Act 34 of 2005 (NCA) is well-known, established, and adhered to-or so everyone would think. The aim of this law is to safeguard consumers against unfair and exploitative practices by creditors and has been in effect for a number of years.

However, despite the legal requirements and the guaranteed protection, they offer consumers, the Ombudsman for Banking Services (OBS) is still receiving, investigating, and resolving complaints from bank customers relating to prescribed debts. In some cases, banks have been found guilty of engaging in this illegal practice.

Unfortunately, in many instances, the protection afforded by the law is beneficial only to consumers who know about the legal principle, as well as the Ombud's office. The majority of the public is left paying for debts that have been prescribed, and are therefore legally no longer collectable by creditors.

Letter of the law

In South Africa, the Prescription Act 68 of 1969, read together with Section 126B of the NCA, stipulates that a debtor's liability to pay a specific debt to a creditor is extinguished as a result of the passing of a prescribed time period.

The Prescription Act prescribes the time period after which a consumer's obligations to pay a monetary debt to the creditor will be extinguished, and the instances in which this period will be delayed or interrupted. The Prescription Act is clear in that generally, contractual and civil debts will be extinguished if not paid or acknowledged as being owed to the creditor by the debtor for a period of three years from the date when the payment was due.