Disclaimer: Please note that I’m not a registered financial nor legal advisor. The information shared on this blog is for general informational purposes only and does not constitute financial nor legal advice. For personalized financial and legal guidance, please consult a certified financial/legal advisor.
A recent experience with a close acquaintance repaying a debt that dated back over 10 years sparked my interest. The creditor had not attempted to communicate with the debtor regarding the debt owed for nearly 10 years and only re-attempted contact after the debtor wanted to take out more debt. I also had a conversation recently about how easily and quickly certain companies advance debt to customers without a proper assessment of creditworthiness. This got me thinking about how many individuals might have debt collectors on their case and are unaware that they are not obligated to pay certain debts. Let’s explore two common instances where the payment of debt in South Africa is no longer enforceable:
1. You Were Lent Recklessly:
The National Credit Act 34 of 2005 (NCA) requires credit providers to conduct thorough assessments of a consumer’s ability to repay debt before granting credit. If the following was not done by a credit provider prior to entering into a credit agreement with you, then there was reckless lending:
1. The credit provider did not ensure you understood the risks, costs, and obligations of a credit agreement.
2. The credit provider did not assess your ability to repay before granting credit.
3. The credit provider granted you debt when you were already over-indebted.
4. The credit provider did not assess your past debt repayment history to gauge your ability to manage debt.
5. The credit provider did not assess your current financial status and obligations to ensure you can meet the new credit agreement.
If there was reckless lending, i.e., the above happened, then the court may order the creditor to refund the borrower any fees or interest charged unfairly to their customers, and the creditor may lose the right to recover the debt, meaning the borrower does not have to repay the debt.
2. When Your Debt Can Be Considered Expired After 3 Years of Non-Payment:
In South Africa, the South African Prescription Act 68 of 1969 dictates that certain debts can expire after a specified period, meaning the debtor is no longer legally obligated to pay the debt, and the creditor is no longer legally obligated to enforce payment on the debt. According to the Prescription Act, certain debts (specifically those that arose by virtue of oral or written agreements for goods or services and short-term loan agreements) prescribe after three years.
What does it mean for a debt to prescribe?
In simple terms, when a debt prescribes, it means that the creditor, (the person or company you’re indebted to) can no longer legally enforce payment of the debt. Essentially, the debt becomes unenforceable, and you’re no longer obligated to pay it. If none of the following have happened with respect to a debt in three years, then your debt prescribes:
1. You have not made any repayments towards the debt.
2. You have not acknowledged the debt.
3. There have been no efforts to collect the debt made by the credit provider, and you have not received any summons to repay the debt.
Free Debt Representation Resources in South Africa:
Fortunately, there are resources available to help individuals navigate debt issues and provide assistance to get the debt legally removed:
1. Legal Aid South Africa: A state-funded organization that provides free legal representation to eligible South Africans, including those struggling with debt issues.
2. Pro Bono Services: Some law firms and attorneys offer pro bono (free) services to individuals who cannot afford legal representation, including debt-related matters.
Now that you’re informed about debt prescription laws and reckless lending, take control of your financial future. If you’re struggling with debt, consider reaching out to the resources listed above or consulting a certified financial advisor for personalized guidance. Knowledge is power – use it to make informed decisions and achieve financial stability.
Stay blessed,
Katekisani