Tag Archives: Debt

When does prescription of a debt start?

Debt does not last forever, after a period of time it prescribes and becomes invalid. Prescribed debt can be explained as old debt that has not been acknowledged over a period of three years. This means that a debt prescribes if:

  • You have not acknowledged the debt in the past three consecutive years, either in writing or verbally.
  • You have not made a payment promised to make a payment to the outstanding debt amount.
  • You have not been summoned to make a payment by a creditor for the debt within the past three consecutive years.

Trinity Asset Management (Pty) Limited v Grindstone Investments 132 (Pty) Limited

On 5 September 2017, the Constitutional Court handed down a judgment in an appeal against the judgment and order of the Supreme Court of Appeal (SCA) against Trinity Asset Management (Pty) Ltd (Trinity). The SCA ruled that Trinity’s claim for repayment of a debt of some R4.55 million against Grindstone Investments 132 (Pty) Ltd (Grindstone) was unenforceable because it had prescribed.

The parties entered into a written loan agreement, effective from 1 September 2007, in terms of which Grindstone borrowed a capital amount of R3 050 000 (loan capital) from Trinity. Clause 2.3 of the loan agreement provided that the loan capital was due and repayable to the applicant within 30 days from the date of delivery of Trinity’s written demand.

The majority judgment found that, on a holistic reading of the loan agreement, the parties did not intend to delay when the debt would become due or when prescription would begin to run. The parties’ language in the contract did not signify an intention to delay. The parties simply meant to allow Grindstone 30 days to repay the debt once Trinity had issued demand, not to postpone the due date of the debt to an indeterminate future date. The debt thus became due, and prescription began to run, immediately on conclusion of the contract.

Grindstone therefore raised a valid prescription defence, and the appeal was dismissed.

Conclusion

If you are uncertain about a debt amount or require assistance in this regard, then please contact your financial advisor, who will assist you with taking the next steps.

References:

  • Trinity Asset Management (Pty) Limited v Grindstone Investments 132 (Pty) Limited (CCCT248/16) [2017] ZACC 32 (5 September 2017)

What is Prescribed Debt?

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Do my debts last forever?

Prescription was introduced as means of protecting South African consumers from dishonest credit providers, who are responsible for recklessly lending credit and have contributed to the detrimental debt crisis many South Africans face today.

What does prescription mean?

  • The Prescription Act 68 of 1969 (PA) says that a debt (payment of money) is extinguished/expired after the lapse (passing) of a specific time period.
  • South Africa has different laws which specify time periods, for example, the PA says contractual and delictual debts extinguish after 3 years from when prescription starts.
  • Prescription may be delayed or interrupted.

It is important to bear in mind that not all debt prescribes after a period of three years. Debt related to a cheque, for example, only prescribes after 6 years. The purpose of prescription in South Africa is to compel creditors and collections agents to collect money owed to them within a specified period and not delay collection so that it accumulates massive amounts of interest and costs.

What are the consequences of an extinguished debt?

  • The debtor is not liable to the creditor for a debt after the time period has lapsed.
  • The creditor may not institute legal action against the debtor for a debt.

When does prescription start?

As soon as the debt is due (a debt is due once the creditor can identify the debtor and the facts from which the debt arises).

  • If the debtor prevents the creditor from gaining knowledge of the debt (excluding debts arising from agreements) prescription runs from when the creditor has knowledge of the existence of the debt.

An important point to remember is that it’s perfectly legal for a debt collector or attorney to demand payment for a prescribed debt. It is up to a debtor to raise prescription as a defence.

References:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Credit Bureaus: Can I be blacklisted?

There is no such thing as a blacklist. It simply means that there are negative data on your credit report that is hosted at a Credit Bureau. This negative data can be anything, from a plain collection on one of your loans right through Judgment data or even Debt review.

This negative data will have an impact on your ability to get loans or open retail accounts as the credit provider will see this negative behaviour towards your current credit as a potential way that you will handle their loan; if granted.

A Credit bureau is an organisation that keeps a record of your credit information. Your credit record shows how you manage your debts and is used by credit providers and moneylenders to decide if you can afford to borrow money or pay back a new loan.

The National Credit Act says each credit bureau must be registered with the National Credit Regulator – who decides how your credit information can be used and who can see your credit record.

What is the role of a Credit Bureau?

When you take out your first loan with a credit provider, you have to fill in a form that asks for consumer credit information – including your credit history, financial history, education, employment and identity details. This information, and the details of the loan, is given to a credit bureau that then puts together credit report.

What are your rights regarding a Credit Bureau?

  • To be told that a credit provider intends to report negative information on you to a credit bureau 20 working days before they do so
  • To get a copy of your credit record from a credit bureau when you ask for it – you can get one free record each year but may be charged a small fee for further records
  • To challenge information kept by a credit bureau if you are unhappy with it
  • For your information to be kept confidential, and for it to be used only for the purposes that are allowed

How can your credit information be used?

  • To decide whether or not you can afford credit
  • To investigate fraud, corruption or theft
  • To consider you for employment in a position that requires trust, honesty and the handling of cash or finances

References:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)