2023, a silver lining for many as Covid debt prescribes
2023 marks three years after the first Covid 19 lockdown was first implemented in South Africa, rendering three million people jobless and practically upended an entire economy. After a tumultuous period all around, the dust is seemingly settling and with local businesses starting to recover opportunities have opened up for people to work and earn a living together. However, this has unfortunately not been the reality for all three million people who lost work due to the pandemic and in most instances started falling behind on their debt.
Nevertheless, three years after the dark cloud began those still have not managed to get back on their feet might be due for a bit of a silver lining, or at least as far as their outstanding debt is concerned. With the debt defaults that came about as a result of that first Covid 19 pandemic lockdown in 2020 finishing their three year mark and thus becoming prescribed, many consumers might be eligible to have these debts written off. This much needed relief for some might give some consumers who still suffer the consequences of Covid induced debt defaults on their credit report. Let us unpack exactly what prescribed debt is as well as how it works.
When a creditor does not ask for payment, contact you regarding legal action against you, start legal proceedings against you, or otherwise establish contact with you after three years (or the applicable time period, depending on your loan type), the debt becomes prescribed. As a result, the creditor no longer has the right to demand repayment from the debtor in the future.
The vast majority of people using credit do not realize that old debt obligations (three years or older) must be acknowledged before it can be paid off, since they are often passed onto collectors and pursued by them. This leads to a scenario whereby unknowingly, debtors who pay off or admit that a prescribed debt exists have waived the prescription defence and are now responsible for the full amount of interest and fees. Additionally, some creditors frequently use this tactic to get people to settle debts which would otherwise be invalidated by the time passed. However, the law states that if no recognition or payment is made within three years, the debt is deemed invalid.
As a matter of course, debt prescription must meet some requirements, including not relocating or altering your contact information without notifying the creditor. The prescription will not apply if the credit provider can demonstrate reasonable proof that they contacted you throughout the prescription period. In the event of an absence of communication due to your efforts to compel the prescription, you are fully responsible for the payment. It is only in cases of creditor shortfalls that prescription is invoked.
Overall, consumers are urged to take advantage of the season and remove any negative information that may display wrongly or incorrectly on their credit profile as we embrace this intriguing year in financial services. One free credit report per year is yours to request from the credit bureaus. Request your credit profile by contacting the credit bureaus. If you think an account has been prescribed, you can dispute it by filing a dispute with the appropriate credit bureau. You may then approach the Credit Ombudsman for more help if the credit bureau does not answer to you after 20 working days or if you are not satisfied with their decision.
The clean slate presented also provides a great opportunity for consumers to adopt new habits that will allow them to conform to their new standard of being frugal and open the door for fresh, prudent financial choices.
If you suspect that some of your debt may be prescribed contact NDA today and we can help have it successfully disputed.