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Thread: Prescription where payment or acknowledgement of debt has taken place

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    Diamond Member Vanash Naick's Avatar
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    Prescription where payment or acknowledgement of debt has taken place

    In the ordinary course of understanding prescription, one would conclude that an acknowledgement of debt or actual payment revives the prescribed debt.
    This was so, until section 126(B) of the National Credit Act 34 of 2005 changed the position.

    It caters for a situation where a debt is indeed prescribed but a debtor gets ‘trapped ,’ into a payment or acknowledges debt.
    The provision states that prescription will apply had the consumer reasonably been aware of the defence of prescription when contacted.
    The problem is that writing to a creditor to express this state of affairs, many debtors don’t get the desired result because they are always pointed back to the actual payment that they made or the acknowledgement of debt they undertook on what would have been a prescribed debt.

    The following applies to debts that fall within the ambit of the National Credit Act.

    So, should writing to the creditor and expressing this not meet the desired results, you have to challenge the creditor to sue out summons and serve and file a notice of intention to defend, a special plea of contravention of National Credit Act( reactivation of prescribed debt) and a plea on merits(reliance in section 126(B)(1)(b)(ii).

    126B.Application of prescription on debt
    (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.”

    Scenario:
    X takes out a loan with XYZ Bank in 2008, X pays for January, February and March of 2008. The debt becomes due and payable, however XYZ Bank doesn’t sue out summons. The Debt prescribes in April 2011.
    The national credit Act is amended with new provisions that took effect from March 2015. From this time, prescribed debt cannot be sold, or reactivated, a consumer can raise prescription as a defence to a payment demand letter or payment demand call without going to court and no person may continue may continue the collection of a debt “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.”
    So, in short where efforts to state that a debtor would have raised prescription as a defence but did not know of the existence of the defence but had the debtor knew of this defence the debtor would have reasonably raised prescription and therefore the acknowledgment of debt or actual payment on a debt should fall away. Where written efforts fail, a debtor should challenge the creditor to then sue out summons so that the debtors defence can be adjudicated upon by a court.
    Last edited by Vanash Naick; 26-Feb-17 at 04:38 PM.
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