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Recless Credit and Prescribed Debt

See the prescriptions of the National Credit Act - Section 80 to 84, regarding reckless credit.

* If any account was opened after 1 June 2007, or your credit limit increased, and this accounts caused you to become over-indebted, please inform your debt counsellor.

* Before accepting a credit agreement, the creditor must first provide you with a pre-agreement. The pre-agreement must provide you with all information, such as % and amount of interest, amount of costs, what the full agreement will cost you, etc.

There are also prescribed maximum interest rates and fees/costs a creditor can charge.

* We will get a transcript of the phone call, or a copy of your application, to make sure you have provided ALL the information regarding income, expenses and credit agreements at the time.

* The onus is on the creditor to make sure a consumer can afford more credit. The Credit Act prescribes that a creditor must do an assessment and must confirm income, take into account other credit agreements and make sure your budget is sustainable. Only after this, they must be sure you can afford the monthly repayment of the new agreement, before granting more credit.

* ONLY a court can find reckless credit.

* If you can proof reckless credit, a court will rule on this. In most cases, all interest and costs on the accounts will be written off and you will only pay back the capital, or that the account must only be paid back, after the other accounts were paid off. If we can proof a creditor ignored the fact that you could not afford more credit, the account can even be written off.

* Very few creditors are found guilty, as in almost all cases they can show that the consumer provided untrue information. However, if you suspect that you could not afford another account that was granted, tell your debt counsellor.

These are the documentation we request from creditors:

Documents provided by creditor

1. Application form
2. Transcript of telephone recording
3. Credit assessment
4. Credit bureau report
5. Salary advises
6. Proof of other income
7. Bank statements
8. Were rights and obligations explained
9. Was employment confirmed
10. Was income confirmed
11. Pre-agreement
12. Credit agreement
13. Other

It is also important that a creditor must verify information. If you for instance put R500 for groceries for a family of 5, the creditor must realise this is impossible.

Prescribed Debt

You have forgotten about an account you had 10 years ago, but now you receive a phone call, telling you that you must immediately pay the outstanding debt. Collections agents use different tactics, from that you can pay as little as R20 now, while others use scare tactics, by threatening that you will lose your home, vehicle and furniture and will be blacklisted for the next 30 years - if you do not pay the account immediately. Debt collectors very well know they are not allowed to bully consumers into paying accounts which have prescribed – but unfortunately consumers do not always know their rights.

Do not believe these stories, if an account has prescribed, it has prescibed and is not just dormant - you don’t have to pay it any longer.

Prescription is a strong legal term. The Prescription Act provides that the period of prescription of debt shall be 30 years in respect of any ‘judgement of debt’ and 3 years for ‘any other debt’. A creditor therefore has only three 3 years to enforce civil legal action, to collect arrear debt.

The effect is that in the case of ‘any other debt’, where no payment has been made for a period of at least 3 years, the debt has “prescribed”. This means that the debt has been completely distinguished and does not have to be paid.

When debt was “written off” by a creditor, it does not mean the debt has prescribed. It can show on your credit bureau report “Debt written off”, while the creditor still retains the legal right to collect the written off debt, until the 3 years have lapsed. In many cases the creditor just moves the debt to a collections account, therefore showing “written off”.

Some creditors sell their Debtor’s Book of bad debt to debt collectors, for a much lower price than what the collectable debt is. The aim of the debt collector would be to make profit from the book he bought. Many of the books contain very old accounts, which have already prescribed, but as consumers are ignorant about prescriptions, debt collectors yearly collect thousands of rands in unlawful collections.

THE GOLDEN RULES WHEN YOU RECEIVE A CALL FROM A DEBT COLLECTOR AND YOU ARE NOT SURE THE ACCOUNT HAS PRESCRIBED:

o Do not admit you owe money. Just say: “such an old account has definitely prescribed” and put down the phone.

o Never sign any acknowledgment of debt, as this will interrupt the prescription period and the three years will start running again.

o Do not pay anything, as this will interrupt the prescription period.

If anyhow in doubt, ask for a recon statement of your account. Remember to mark it “without prejudice of rights and admission of guilt”. The creditor must not only provide you with a letter, stating you owe an amount – it must include detailed information of first date of default, all payments made, with dates, interest added, costs, fees, etc.

AN ACCOUNT HAS NOT PRESCIRBED:

o When you admit, in any form, that you are liable to repay the debt. If the three years have not prescribed, and you admit the debt, the prescription period will be cancelled and starts running again. Remember, creditors record phone calls, so you cannot deny it afterwards.

Many times the Debtor’s Books sold, are of debt on the brink of prescription. To get a judgment will take a while, so the three years can lapse, before the collector can get a judgment - but if you admit you are liable to pay the account, even a day before the 3 years lapse, the three year prescription will start running again - and be sure you will end up with a judgment then.

DO NOT SIGN ANY REPAYMENT AGREEMENT!

o When a creditor got a judgment (within 3 years), which will then stands for 30 years and you will be held liable for the outstanding debt, interest, costs, as well as legal costs – for the next 30 years.

As soon as you become aware that there was a judgment granted, immediately make arrangements with the creditor to repay the money, or the Sheriff of Court will repossess your assets, to pay your debt with. You will be held responsible for any shortfalls if the debt is not settled after the auction of your possessions.

A debt collector/creditor cannot just tell you he obtained a judgment, he must provide you with a copy of the judgment, and if you are still in doubt, phone the Clerk of the court where the judgment was granted, give the case number, and ask to confirm the judgment.

Debt that does not prescribe:

o Debt owe to the State

o Tax

o Municipal debt

o TV Licences

o Traffic fines



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