Your guide to prescribed debt

When neither you nor your creditor have acknowledged a debt that you owe them for a specified number of years, it becomes prescribed.

But what exactly does this mean, and how do you know if your debt has prescribed? We find out.

Debt prescription, and the periods that apply

The Prescription Act 68 of 1969 details the law with regards to various prescriptions, including prescribed debt. According to the act, “A debt shall be extinguished by prescription after the lapse of the period which in terms of the relevant law applies in respect of the prescription of such debt.”

According to the act, the periods of prescription are as follows.

• A period of 30 years is applicable to any debt secured by mortgage bond; any judgment debt; any debt in respect of any taxation imposed or levied by or under any law; any debt owed to the state in respect of any share of the profits, royalties or any similar consideration payable in respect of the right to mine minerals or other substances.
• A period of 15 years applies to any debt owed to the state and arising out of an advance or loan of money or a sale or lease of land by the state to the debtor, unless a longer period applies in respect of the debt in question in terms of paragraph (a) – (see above).
• After a period of six years, a debt arising from a bill of exchange or other negotiable instrument or from a notarial contract, unless a longer period applies in respect of the debt in question in terms of paragraph (a) or (b) – (see above) – becomes prescribed.
• A period of three years applies to all other debt, unless an act of parliament provides otherwise.

Has your debt been prescribed?

Neither creditors nor credit bureaus will notify you if your debt has prescribed. However, if you check your credit report, you’ll notice that the debt no longer reflects.

Nthupang Magolego, senior legal advisor executive at the National Credit Regulator (NCR), explains, “Consumers should determine whether or not their debts have prescribed by checking the last date when payment of the debt was made, the last date when any express or tacit acknowledgement of the debt was made, or the date the consumer received court documents from a credit provider demanding payment of the debt. All of these must take place before the lapse of the applicable prescription period.”

Magolego adds, “In terms of the provisions of the National Credit Act (NCA), prescribed debt must not be loaded on a person’s credit bureau records.”

You may find, however, that a creditor attempts to enforce its right to collect a debt that you had owed, that has now prescribed. In order to fight back, you need to familiarise yourself with the National Credit Act.

“The NCA doesn’t allow a creditor to collect prescribed debt, and doing so will be regarded as prohibited conduct. The necessary enforcement action will be taken against such a credit provider. Consumers have a right to refuse to acknowledge or pay any prescribed debt, and must report companies that are demanding payment to the NCR,” says Magolego.

It’s important to note that debt prescription can be interrupted or delayed by certain events. For example, if you’re outside South Africa, or if you’re married to the creditor, or you and your creditor are partners and the debt arose out of that partnership, the prescription process may take longer.

What does prescription mean for your credit score?

Having your debt prescribed doesn’t guarantee that your credit score will improve. It may take time and effort to rebuild your credit score, and acquiring new credit may prove difficult.