Know your rights on prescribed debt
Cape Town - About the time the shops start filling with tinsel and other Christmassy trinkets, my inbox fills up with e-mails from people complaining about being harassed, out of the blue, by debt collectors demanding that they pay a seemingly “thumb-sucked” amount.
Can collectors contact you many years after you last had dealings with a company and demand that you pay some alleged debt?
Yes, they can.
The Prescription Act is intended to give consumers some protection against debt collectors hounding us to pay a very old, inflated debt which we can barely recall.
But it does not preclude collectors from “chasing” prescribed debts.
It is up to the consumer to know about prescription and raise this as a defence in the face of a demand for payment. If they don’t, they are fair game. If ever there was a case to show knowledge is power, this is it.
How do you know if a debt has prescribed?
If, in the past three years, you have not: made any payment towards settling a debt, acknowledged owing the money in any way or agreed to pay it, or been summonsed in respect of it, it has prescribed, and you can raise this as a defence when asked to pay such a debt.
The debt-collecting company or legal firm should close its file on you at that point. Some do, but others continue with the harassment via SMS, letter or email.
A threat which works well on most consumers is the one about being “blacklisted”, because it’s difficult to live without access to any form of credit. But the National Credit Act prohibits the listing of a prescribed debt.
It follows, then, that it’s unethical for debt collectors to use the threat of “blacklisting” in making demands for payment.
For many years, Joburg-based law firm JM Attorneys has been collecting on alleged Health & Racquet Club debts. The operator of the franchise, LeisureNet, was liquidated in 2000, and its joint chief executives, Peter Gardener and Rodney Mitchell, were later convicted of fraud.
So the company doesn’t exist any more, and clearly JM Attorneys, having “bought the debt book”, as they say in the industry, is collecting for its own account.
In 2011, I approached JM Attorneys managing director Gert Visser about the firm making a “blacklisting” threat to a consumer.
He denied this was the case, saying: “Please be advised that any such threat (blacklisting) is contrary to our policies and to our values, and we absolutely do not do so…
“We vigorously deny making any threats of blacklisting and we trust that this is now put to rest.”
Enter Christie Bosman of Winklespruit, who had a Health & Racquet contract some 15 years ago and denies ever owing the gym company any money, and hadn’t received any demands for payment until August this year. That’s when he got his first “pay up or else” letter from JM Attorneys, threatening legal action unless he paid R2 500.
Among the consequences mentioned was the attachment of his household contents and listing the debt with “the credit bureau”. Each time, Bosman responded to the demands in writing, saying the alleged debt had prescribed and that unless they could prove otherwise, they must close his file.
But they didn’t let up. On September 30, he got an SMS which read: “You may be listed at the credit bureau for your Health & Racquet account. Call 011… urgently.”
So clearly, not making “blacklisting” threats – more correctly referred to as an adverse listing – is no longer contrary to the firm’s policies.
Bosman called the number and spoke to a JM Attorneys call centre operator by the name of Betty. I have a recording of that conversation.
Betty confirmed that he was indeed listed for that debt, but had to put him on hold when asked to name the bureau.
She came back with “either with ITC or Experian”.
Bosman checked with both credit bureaux and discovered that his record was clean.
Betty also told Bosman that he needed to “send us a prescription order” from court in order to back up his defence of prescription – sending emails to this effect was not enough.
Bosman asked her: “How do I go about getting that, and from which court?” Her response: “I don’t know.”
I gave JM Attorneys managing director Gert Visser ample opportunity to respond to both issues – the threats and false claim of a credit bureau listing, and the demand for a “prescription order”.
Last Tuesday evening he stated via email that the firm was investigating and would respond “in due course”. He hadn’t at the time of writing.
In his letter of November 2011, in response to a similar set of questions posed by myself, he said: “For your information, we would remind you that no debt simply prescribes on its own, and that any creditor is entitled to endeavour to collect on debts that are owing. On the other hand, a debtor may raise the defence of prescription in response to legal action.”
JM Attorneys does not appear to take legal action against former Health & Racquet Club members. They just threaten to when demanding payment of alleged debts.
“The law of prescription was introduced as a defence available to debtors when creditors do not take action against them,” Visser continued.
I approached the National Credit Regulator (NCR) for comment on Bosman being told by JM Attorneys that he needed to go to court to get a “prescription order”.
Spokesman Lebogang Selibi said it was true that, strictly speaking, “only when a court has made a ruling that the debt has in fact prescribed will this defence be enforceable.
“But the NCR… does not condone the conduct of the attorneys (in question),” he said.
From practical experience, Selibi said, once an alleged debtor raised prescription as a defence, the debt collectors refrain from collecting.
The Prescription Act is intended to protect consumers from such action.
Those demanding money of you need to back up their demands with information – a copy of the contract you signed with the debtor, a statement reflecting your last payment, proof of the handover amount and all costs and interest which have accrued since.
Most won’t or can’t do this, and instead seek to put the onus on the consumer to come up with the proof that they don’t owe the money.
Consumers have a right to a free credit report every year from all credit bureaux. If you find a listing for a prescribed debt, you are entitled to lodge a dispute with the credit bureau.
TransUnion: www.mytransunion.co.za, call centre: 0861 482 482
Experian: www.experian.co.za, call centre: 0861 105 665
XDS: www.xds.co.za, 011 645 9100
What to do...
If you are suddenly faced with a demand for an old debt, especially if the collector refuses to provide documents, tell them, in writing, that the debt has prescribed and that unless they can prove otherwise, they must close your file. If they harass you, demand to see proof of the debt: original contract, proof of the date of default, the handover amount and a breakdown of all the costs. Costs and interest may not exceed the handover amount. And a creditor or collector may not list a prescribed debt on your credit record.
* Please note: not all debt prescribes in three years. A 30-year prescription period applies to mortgage bonds, any judgment debt and any debt in respect of taxation imposed or levied by any other law, including municipal rates, traffic fines and TV licences. - Cape Times