South African debt collectors are scrambling to collect outstanding debts before new amendments to the National Credit Act (NCA) come into effect. The amendments, gazetted on March 13th, will prevent debt collectors from pursuing debts that have expired.
Under the new regulations, if a consumer has not acknowledged a debt, either verbally or in writing, for more than three consecutive years, the debt is considered prescribed and is no longer valid.
Neil Roets, CEO of Debt Rescue, cautions consumers that any payments made within the three-year period will keep the debt valid. He also advises against promising to pay and notes that creditors must not have issued a summons for the debt within the same timeframe.
Roets has observed a surge in last-minute collection attempts by debt collectors and creditors hoping to beat the implementation of the new law.
The amendments are expected to significantly impact the use of emolument orders, also known as garnishee orders, as many debts these orders were issued for have likely prescribed.
The buying and selling of prescribed debt was previously a lucrative business for companies specializing in pursuing consumers with no legal obligation to repay.
A key benefit for indebted consumers is the provision that credit providers are prohibited from taking legal action against a debtor once a court date has been set for debt review. This strengthens the role of debt counselors in protecting consumers and makes debt review a preferred option for managing debt.
The amendments also increase the requirements for affordability assessments conducted by lenders before granting loans. This is expected to make unsecured credit more difficult to obtain for financially strained consumers.
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