Opaque consumer credit law still haunts poor households
Yay, I thought, when the National Credit Act was amended last March to outlaw the collection of a prescribed debt.
Not because I think people should shirk their commitment to settle their debts.
I just don't think it's fair for someone to be contacted out of the blue by a collector, who has bought an old, written-off debt, then added years' worth of interest and costs and is now demanding payment.
In the past, thanks to the quirky Prescription Act, it wasn't illegal for a collector to try to get someone to pay a prescribed debt, a debt which has been dormant for more than three years - no payment made or acknowledgement of debt by the debtor and no summons issued.
Home loans and state debt are exempt and only prescribe after 30 years.
If the debtor did not know about debt prescription and did not raise the P-word as a get-out-of-debt-jail- free card, and agreed or promised to pay, it was game over and he was forced to pay the old debt, plus all the add-on amounts.
So clearly, it wasn't in the massive debt-collecting industry's interests for consumers to know about prescription and they made millions from those who didn't.
Which is why I was so excited about that section of the National Credit Amendment Act because it protected all debtors from paying prescribed debt, not just those who know about it.
No demands for prescribed debt should be made any more - end of story.
But, no, the demands have continued.
When I questioned a firm of attorneys about its demanding payment of an allegedly prescribed debt, one of its attorneys responded with this: "We have spent a considerable amount of time and resources researching the application of the NCAA (pertaining to prescription) and also obtained independent legal opinion in this regard.
"It is vastly more complicated than is considered by the popular media.
"You are welcome to schedule a consultation if you wish to discuss this aspect more in depth, as attempting to communicate the scope of our research and our findings in an e-mail will be impractical."
Obstruction at its most haughty, especially as their offices are 600km away.
A source at the Credit Ombud's office says the wording of the amendment is open to interpretation and the one which the collectors are relying on is this: that a prescribed debt cannot be collected "where the consumer raises the defence of prescription, or would reasonably have raised the defence of prescription had the consumer been aware of such a defence in response to a demand".
The argument is that this additional protection does not extend to a consumer who was aware of, alternatively was made aware of, the defence of prescription.
"So, where the credit provider can prove that the consumer was aware of the existence of the defence, or was made aware of the defence of prescription and did not raise the defence of prescription, the reactivation and continued collection of prescribed debts is not prohibited."
The upshot is that many collectors are still sending those demands for prescribed debt, with the addition of a paragraph or two about prescribed debt.
Or an SMS will refer the alleged debtor to the collector's website to read up on prescribed debt.
And if the person doesn't bother to get clued up and goes on to agree to pay, or make a payment, well, he loses the prescription defence - on this interpretation.
But the national credit regulator disagrees with that interpretation.
"Whether the consumer knows about the prescription defence or not, the debt has prescribed and there should be no collection or re- activation of it," a spokesman said.
Any collector attempting to collect prescribed debt is "circumventing the application of this provision.and misleading consumers," he said.
It's high time this amendment and its interpretations were tested in a court of law.
As much as 77% of household income among low-income earners services debt.
How much of that is servicing very old, inflated debt instead of feeding a child, I wonder?
The P word
Gavin Mahuma was contacted by Ampath Laboratories and then debt collector Vericred recently, with demands to pay a R1250 debt for a service provided more than five years ago.
It was the first he'd heard of the debt and his request for information about the service provided and the handover amount yielded nothing, he says.
Mahuma then contacted In Your Corner, asking for advice.
I told him what I've told many others in a similar situation: "Write to them, saying that the alleged debt has prescribed, and that you are thus no longer legally obliged to pay it. Tell them to either prove it has not prescribed, or close their file and stop contacting you."
He did, and got this e-mail: "This serves as confirmation that Vericred Collections has written off your account as it has prescribed."
"I cannot thank you enough for your advice," Mahuma said. "I could not believe this when I saw it."