Prescription was introduced as means of protecting South African consumers from unscrupulous credit providers, who are accountable for recklessly lending credit and have contributed to the detrimental debt crisis South Africa currently faces.
Prescription in South Africa can be better understood by reading the following.
South African consumers have the two defences, induplum and prescription, against credit providers:
1. Induplum: The in duplum rule simply put, states that upon default, the interest charged against a consumer cannot exceed the capital outstanding, that is to say, all a consumer can only ever pay as a maximum, is double the original debt amount at the time of default.
2. Prescription: Prescription in South Africa refers to old debt, which occurs when it is no longer obligatory for a debtor to pay off their debt. Unfortunately, many South African’s are not aware that debt can prescribe.
The Prescription Act 68, implemented in South Africa in 1968, enforces the regulation of prescription and states that debt can be considered as prescribed if the following requirements occur:
If in anyway, verbally or in writing, have failed to acknowledge the existence of the debt
Have not made a debt repayment for that particular debt in the last three years
If you have not been summonsed in respect of the debt within a period of three years
If the debt has prescribed – You are not legally obligated to pay for it.
However, with regards to prescription in South Africa, it is important to bear in mind that not all debt prescribes in a period of three years. The following types of debt are likely to take an extended period of time to prescribe:
Judgement debt only prescribes after 30 years
Mortgage/Home loan debt
Debts owed to the state/municipality. E.g. Tax, Municipal Debt, TV licenses
It is perfectly legal for a debt collector or attorney to demand payment for a prescribed debt. It is up to a debtor to raise prescription as a defense.
The purpose of prescription in South Africa is to compel creditors and collections agents to collect money owed to them within specified period and not delay recovery so that it accumulates massive amounts of interest and costs.