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Under Pressure: These are the debts you don’t have to pay the bank back

Prescription is a legal principle defining the extinguishing of debt, or the obligation to pay outstanding debt, after a stipulated period of time.

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Reana Steyn, the Ombudsman for Banking Services, said the aim of this law is to safeguard consumers against unfair and exploitative practices by creditors and has been in effect for a number of years.

Under Pressure: These are the debts you don’t have to pay the bank back
The Ombudsman for Banking Services in South Africa has warned banks to stop the illegal activity of demanding and collecting debt in disregard of the National Credit Act on prescription. Photo: Ombudsman for Banking Services

Steyn said despite the legal requirements and the guaranteed protection the Ombudsman for Banking Services offers consumers, the watchdog was inundated with complaints from customers of different banks relating to prescribed debts. In some instances, Steyn said banks have been found guilty of engaging in this “illegal practice”.

“Unfortunately, in many instances, the protection afforded by the law is beneficial only to consumers who know about the legal principle as well as the ombud’s office. The majority of the public is left paying for debts that have been prescribed and are therefore legally no longer collectable by creditors,” says Steyn.

In South Africa, the Prescription Act (68 of 1969), read with Section 126B of the National Credit Act, stipulates that a debtor’s liability to pay a specific debt to a creditor is extinguished as a result of the passing of a prescribed time period.

“The Prescription Act prescribes the time period after which a consumer’s obligations to pay a monetary debt to the creditor will be extinguished and the instances in which this period will be delayed or interrupted. The Prescription Act is clear. Generally, contractual and civil debts will be extinguished if not paid or acknowledged as being owed to the creditor by the debtor for a period of three years from the date when the payment was due,” says Steyn.

However, there are exceptions where the prescription period for certain contractual and civil debts is longer.

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