Tag: <span>national credit act</span>

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Illegal debt collection

Have you (or someone you know) been contacted by a debt-collecting firm about an old debt for which they’re now demanding payment? Are they claiming that the outstanding balance has increased significantly, due to the accumulation of interest and other charges? Be warned that many of these collecting companies have a track record of using bullying tactics to illegally collect amounts for which you may NOT be liable.

Firstly, the Law of Prescription (1969) protects any debtor from having to pay a debt which has been dormant for more than three years. This means that if the debtor has not acknowledged the debt (by signing an acknowledgement or making a payment) AND the creditor has not obtained judgement for that debt within that three-year period, the debt has legally lapsed and the debtor cannot be held liable for payment.

Secondly, Section 103(5) of the National Credit Act (2005) limits the amount to which an outstanding balance can increase. In brief, this means that a creditor cannot add interest and charges that exceed the amount that was outstanding at the date that the debtor defaulted on the debt. For example, if you owed R5 000 on an account and stopped paying the creditor, that creditor is legally not allowed to add more than another R5 000 in interest and charges, so the total balance that they can demand from you cannot exceed R10 000.

These are not suggestions which a creditor can choose to apply if they feel like it ; These are LAWS. Unfortunately there are creditors and debt collectors who take advantage of the fact that it’s unlikely that the proverbial “man in the street” will know all of his legal rights. It’s ironic that, by demanding payments to which they’re not entitled, THEY are effectively stealing from these debtors.

News

Incidental Credit

For someone who is working on a tight budget (which, to be honest, is most of us), unforeseen expenses such as medical bills or sudden demands for payment of arrears on contracts (such as club memberships and cell-phone contracts) mean that we have to try and find extra money that sometimes just isn’t there. When one is already battling to make ends meet and keep up with all of the other payments that have to be made, that extra demand is like a brick being thrown to a drowning person.
According to the National Credit Act, if a creditor (i) charges any fees or interest because an account was not paid by a specific date or (ii) quoted a higher price if an account was paid after a certain date, that account automatically becomes an “Incidental Credit Agreement”. This means that, for anyone who does feel that their debt repayment instalments are unaffordable and decides to apply for Debt Review to relieve them of this burden, accounts such as those mentioned above are eligible for inclusion. The only condition is that 20 business days must have passed since the creditor charged a fee or interest for late payment, or since the higher price for the later payment became applicable. Should the accounts be placed under Debt Review, the creditors cannot proceed with legal action, and the law requires them to negotiate a reduced instalment with the Debt Counsellor.
This is yet another way in which the National Credit Act meets its stated aim of relieving consumers who are over-indebted. Thankfully, it aims to throw a drowning person a rope, rather than a brick!