When most people hear the word “prescription”, they think of an instruction written by a doctor authorising a pharmacist to dispense medication to a patient. However, in a legal context “prescription” refers to the extinguishment of a debt after a prescribed period of time. In other words, when you owe someone money and they do not collect it from you for a period of what is usually 3 years, and fail to sue you for the money, then the debt is “prescribed” . The creditor loses the right to claim payment on the prescribed debt ever again.
Time Periods For Prescribed Debt
|debts secured by mortgage bond
tax related debts
|debts owed to the state due to money loaned, land leased or land purchased from the state||15 Years|
|debts relating to cheques||6 Years|
|all other debts||3 Years|
One of the recent amendments to the National Credit Act, contained in section 1268, prohibits the sale and collection of prescribed debts, and in fact goes as far as to crimina lise such actions. This has a considerable impact on consumers and creditors as a vast number of debts are in fact prescribed. It has also been a very common practice for creditors to sell their old, prescribed debt to other companies who would then proceed to collect it from consumers.
There are, however, certain events which interrupt prescription, causing it to either pause or begin afresh. Prescription will not apply if:
- You acknowledge the debt, or make payment on the debt
- The creditor takes legal action against you
- You are residing outside of South Africa
- You are married to, or business partners with, the credit provider
Thus, in order to prevent the interruption of prescription, a consumer must beware of receiving phone calls from collections personnel requesting payments to be made. The debt may have prescribed and if you do make a payment now, no matter how minimal, you will reactivate the debt and have to pay it all. Even an acknowledgement of debt over the phone can be used to interrupt prescription.
Once a debt is prescribed, it must be written off by the credit provider and removed f rom your credit report. If you find that a prescribed debt is still reflecting on your credit report, either:
- Contact the credit provider and request the removal of the prescribed debt from your credit profile.
- Contact the major credit bureaus (Transunion, Experian, XDS, CompuScan) directly and lodge a dispute to request that they remove the prescribed debt from your credit profile.
In the event that you are served with a summons, before even considering the surrounding facts of the matter, you should check whether prescription can be used as a defence.
Section 126B further has an effect on debt review. It is very important to investigate whether any debt has prescribed, so as to ensure that it is not included in the consumer’s debt rearrangement.
Thankfully, debt doesn’t last forever!