What is prescribed debt in South Africa?

10 AUGUST 2023

Prescribed debts are generally contractual and civil debts that should be extinguished or written off after a period, usually 3 years.What is prescribed debt in South Africa?Prescribed debt is a scenario that is mostly unknown to the common credit user, many of whom are caught off guard as a result, and you should absolutely be aware of it. Simply put, prescribed debt is an old obligation that neither party to the contract has acknowledged or paid off within three years. Many people who utilise credit are unaware that this obligation must be acknowledged by the debtor before it needs to be paid because it is frequently passed onto and pursued by debt collectors.

Without recognition, this debt is invalid. If a debtor pays off a prescribed debt or admits that it exists, they have unknowingly waived the prescription defence and are now responsible for the full amount of the obligation, including accrued interest and fees over the years. Some debtors frequently use this tactic to get people to settle debts which would otherwise be invalidated by the time passed.

How does it work?

A debt becomes prescribed after three years (or the applicable time period, depending on your loan type) if a creditor does not request payment from you, contact you regarding legal action against you, start legal proceedings against you, or otherwise establish contact with you. In essence, the debt is therefore erased, and the creditor no longer has the right to demand repayment from the debtor in the future.

Naturally, this is subject to a few requirements, such as the fact that you did not relocate or alter your contact information during the prescription time without notifying the creditor. If the credit provider can show reasonable proof that they made contact with you throughout the prescription period, the prescription will not be applicable. The creditor is fully entitled to payment if the absence of communication was a result of your efforts to compel the prescription. Prescription is only put into action when the creditor is at fault.

What Loans Can’t Prescribe?

Home Loans

A house loan's cumulative debt won't disappear for 30 years. This implies that you will still have to make payments on your mortgage and that you must pay your creditor any applicable interest and penalty fees. A foreclosure could happen if you don't make your mortgage loan payments.

Municipal Debt

Municipal bonds or accounts are debt obligations that are issued by governmental bodies. This covers electricity, tariffs, and taxes. Even if your electricity payment has been fully paid, the Municipality will turn off your electricity if you don't pay your rates and taxes.

TV Licence

Your ability to legally watch local channels for a whole year is guaranteed by a television licence. Forgetting to renew your TV licence will result in a penalty of 10% per month up to 100% annually, and the unpaid balance will be due for 30 years.

SARS Related Debt

Trying to avoid paying your taxes is against the law. SARS has a variety of debt collection tools available, including selling your belongings and pursuing payment directly from your employer. It is advisable that you inform SARS if you are having trouble paying your taxes in order to prevent their collection procedures.

It is not advised to let debt accumulate for long enough to qualify for prescription. However, if you believe that some debts should be prescribed, use these steps to have the debts erased from your credit report: Pulling a credit report should be your initial action. Each year, you are entitled to one free credit report, which you can get from TransUnion or Experian. Your present debt condition will be indicated by your credit report.

Once you obtain a copy of your credit record, you can get in touch with the creditor and ask for documentation that they have done the necessary precautions to avoid prescribing. It's crucial to let them know that your question is not an admission of the debt and that you believe it shouldn't exist. If the creditor cannot demonstrate that they made an effort to get in touch with you within three years regarding your debt, the amount should be written off.

You can file a dispute with the credit bureaus and advise them that you have debt that has, in your opinion, prescribed and the record should be erased if your prescribed debt has not already been taken off your credit report.