A person may acquire rights or be released from obligations through the passage of time. This is known as prescription. The gaining or losing of rights through the passage of time is known as acquisitive or extinctive prescription.
Extinctive prescription protects the debtor
In short, extinctive prescription entails that if a creditor neglects to claim payment on a debt for a certain period of time, the debt will eventually be extinguished (or fall away). In general, the main purpose of extinctive prescription is to achieve legal certainty and finality in the relationship between a debtor and a creditor, with the focus on protecting a debtor against the injustice of having to defend old claims.
This prevents a situation where the payment of a debt is demanded from a debtor many years later, when the liability for the debt arose so long ago that there is little to no evidence available to prove or disprove the existence of the debt. It also encourages creditors to generally exercise their rights, specifically to collect their debts timeously and without unnecessary delay.
How a debt becomes prescribed
In general, if a debtor in an applicable time period does not make any payment to settle a debt, does not acknowledge owing the debt or agree to pay it; or if the creditor does not demand payment from a debtor, initiate legal action against him or communicate with him in any manner and within the applicable time period, a debt becomes prescribed. This essentially means that the debt (including a subsidiary debt which arose from such a principal debt, such as interest or a surety) is extinguished and the creditor forever loses their right to claim payment based on the debt.
How long does it take for a debt to prescribe?
The time period after which a specific type of debt prescribes is set out in section 11 of the Prescription Act read with section 10(1). The important periods to be observed with regards to credit providers in the consumer-credit industry are:
- 3 years for ordinary debt, for instance, unsecured credit;
- 30 years for debt related to a mortgage bond (a special notarial bond in terms of the Security by Means of Movable Property Act57 of 1993 is included in the term “mortgage”);
- 6 years for a debt arising from a bill of exchange or other negotiable instrument or a notarial contact,unless a longer period applies in respect of the debt in question in terms of section 11(a) or (b); and
- 30 years for debt where a credit provider obtained a judgment against the consumer for the debt. When a credit provider has obtained a judgment for unsecured credit the debt thereon will not be prescribed in three years as is the normal period for unsecured credit, but the period will be 30 years because a judgment was obtained against the consumer for that specific debt.
Prescribed debts can be “reactivated”
Credit providers over the years – the National Credit Act (NCA) refers to a creditor as a “credit provider” – would sell their prescribed debts to debt collectors, who would then contact consumers – the NCA refers to a debtor as a “consumer” – demanding the payment of these debts. Not being aware of their rights, consumers often made payments on these prescribed debts and in doing so unknowingly “re-activated” them.
Collecting on prescribed debts not prohibited
Debt collectors often inflate prescribed debts with more interest and costs, and attempt to collect these from consumers for their own account. Although the Prescription Act’s objective is to give consumers some protection against collectors harassing them to pay on stale and inflated prescribed debts, it does not prohibit debt collectors from attempting to do so.
In a nutshell, consumers are not at liberty to repay prescribed debt as provided for in the Prescription Act, which requires the consumer to be aware of prescription and to specifically raise it as a defence when faced with a demand for payment in order to reap the benefits of it.
NCA prohibits selling, collecting or reactivating prescribed debt that it governs
This abusive practice prompted the Legislature to make amendments to the NCA in 2015 by including Section 126B, which now prohibits any credit provider or debt collector from selling, continuing to collect payment on or reactivating a prescribed debt under a credit agreement governed by the NCA.
Section 126B of the NCA also amended and expanded the operation of the prescription defence for consumers relating to debt arising from credit agreements governed by the NCA. It appears that nowhere else in the world does a provision in credit law exist similar to Section 126B.
Speak to a legal expert
We provide expert legal advice relating to all matters affecting debt. For further queries regarding assistance with debt claims and prescription, please contact our firm for assistance.
For assistance with Litigation and Dispute Resolution
The articles on these web pages are provided for general information purposes only. Whilst care has been taken to ensure accuracy, the content provided is not intended to stand alone as legal advice. Always consult a suitably qualified attorney on any specific legal problem or matter.