There have been lots of harassment incidents from debt collectors because many people do not really know their rights and the extent to which debt collectors can act according to the law. This is why understanding the legal backup and the limits of such agencies is vital when you are dealing with them. As such, this article provides you with essential information on the powers of debt collection agencies as well as what the law forbids them from doing to you. Issues like prescribed debt, when legal actions can be taken, the rights that you have and much more are all discussed.
As much as possible, it is necessary for you to pay your loan as a customer to avoid any forms of accusations of irresponsibility, negligence and so on. While the law does not encourage non-payment of loans, some laws govern loan collection. So, as a creditor or a customer whose account has been handed over, you need to know the laws that regulate the operations of collection agencies. Specifically, you must understand the extent to which they can go so that you can determine when they are within or out of their bounds and what steps you can take.
Debt collection laws in South Africa
Different laws regulate the process of loan collection in South Africa. As such, debt collectors have certain limitations that they must not violate while carrying out their assignment. For instance, once a debt is prescribed, it is unlawful for a collection agency to start chasing you or demand the payment of such loans. Section 126B of the National Credit Act (NCA) talks about the Application of prescription of debt and it states that:
(1) (a) No person may sell a debt under a credit agreement to which this Act applies and that has been extinguished by prescription under the Prescription Act, 1969 (Act No. 68 of 1969).
(b) No person may continue the collection of, or re-activate a debt under a credit agreement to which this Act applies –
(i) which debt has been extinguished by prescription under the Prescription Act, 1969 (Act No. 68 of 1969); and
(ii) 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, whether as part of legal proceedings or otherwise.’
Also, according to Section 15 of the National Debt Collection Act 114 of 1998, under no circumstance is a collection agency permitted to serve you with fraudulent or misleading documents under the disguise of a legal procedure or whatever. In the same vein, he or she is not allowed to come with any person that is claimed to be a police officer, an officer of the court and so on when they are trying to intimidate you.
Then, under the same law, a collector cannot use threat or force to collect money from you. Based on the National Debt Collection Act, such a person cannot threaten you or your family members, and more so, he or she must not act in an unreasonable or intimidating manner against you or anyone that has a close tie with you.
How long before a debt is written off in South Africa?
In South Africa, there is what is known as prescribed debt, and in simple terms, this can refer to an old debt that has not received any acknowledgement for three years or more. It also means a loan that has been dormant for not less than three years. Based on the National Credit Act, once a credit provider does not claim payment of the money for the space of three years, such a loan becomes prescribed.
Also, another instance where a loan can be prescribed is if, as a consumer, you did not make any payments or acknowledge the loan directly or indirectly, then it can be prescribed. But that depends on the loan. If you owe a mortgage loan, the South African Revenue Service (SARS) or the loan is based on court orders, and this can take up to 30 years before it becomes prescribed. However, does that mean you should not pay your loan? It is actually wrong for you not to pay. Long after you have defaulted, it is also wrong for your credit provider or a collection agency to start demanding before you pay.
Can debt collectors take legal action?
Ordinarily, before any legal action can be considered while recovering any loan, the representative of any of the debt collection companies that are handling the issue must have negotiated an acceptable arrangement with the debtor on how to pay. It is, after all, reasonable attempts have been exhausted in recovering the outstanding balance that legal actions can then be taken.
Section 129 of the National Credit Act permits credit providers to initiate legal proceedings until 20 days after the consumer has defaulted. According to the Act, credit providers have to notify a debtor that legal proceedings are about to be initiated before doing so, and then advise the consumer of the right that he or she has. If, after ten days, the consumer does not apply for debt review/debt counselling, it means that the credit provider can go on with the legal action until a court or debt counsellor finds out that the consumer has no over-indebtedness.
Can debt collectors blacklist you?
To be blacklisted, in the first place, is to be registered as a person who has been tagged or recognised as a risk so that he or she is denied from accessing certain privileges and services. Any time you fail to consolidate an outstanding loan, you may be blacklisted, and the effect of that is the rejection of your requests anytime you try to apply for a loan from any creditor.
So, in a situation where you have an unpaid loan, the collection agency may want to threaten you with blacklisting because he or she knows that as the loan lingers in payment, the possibility of recovering it reduces as well. While it is prohibited under the National Credit Act to list a prescribed debt on your credit profile, you should also understand that it is against their practice for a collection agency to threaten you on “blacklisting” your credit profile simply to coerce you to pay.
Can you go to jail for not paying debt in South Africa?
The kind of loan that you owe determines if you will go to jail for not paying it or not. If you refuse to pay your taxes or child support, for instance, you might be sent to jail. The reason is that the non-payment of your taxes or child support is a federal crime which can be classified as a contempt of court. While you could spend up to six months in jail, there are also some fines that you may have to pay including those of the attorney and court costs.
However, some loans are referred to as "civil" debts which you cannot go to jail for. For instance, if you owe a hospital bill, student loan, or credit card and have not paid, you cannot be jailed for it.
Based on the operations of debt collectors that have been considered so far in view of the laws that regulate their activities, every customer must understand their limitations. Also, in case any loan collection agency harasses or intimidates you to make you pay what you owe, you can report such to any of the State Attorney General's office, Federal Trade Commission, Consumer Financial Protection Bureau and even the Council for debt collectors.
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