The law forbidding creditors from collecting on prescribed debts, which falls under the National Credit Act 34 of 2005 (NCA), is well-known, established and adhered to, or so you might think.
The aim of this law is to safeguard consumers against unfair and exploitative practises by creditors, and has been in effect for a number of years.
Despite the legal requirements and the guaranteed protection offered to consumers, Reana Steyn, the Ombudsman for Banking Services (OBS), warns that the 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 prescribed and are therefore legally no longer collectable by creditors,” says Reana.
LETTER OF THE LAW
So what exactly is a prescribed debt? In South Africa, the Prescription Act 68 of 1969, read with Section 126B of the NCA, stipulates that a debtor’s liability to pay a specific debt to a creditor is
