Ina Opperman

By Ina Opperman

Business Journalist


Watch out! – Some SA banks rip off customers with shady debt collections

If you haven't paid or acknowledged a debt and received no summons relating to it in three years, chances are that it's prescribed.


Indebted consumers must watch out, as some banks are still collecting prescribed debts, despite this being in violation of credit laws.

One would think that banks would adhere to the National Credit Act which forbids this practice, but according to the Ombudsman for Banking Services this isn’t always the case.

The National Credit Act (NCA) aims to protect consumers from creditors’ unfair and exploitative practices, but despite the legal requirements and guaranteed protection the office of the ombudsman still receives complaints about prescribed debts, Reana Steyn, the Ombudsman for Banking Services (OBS) warns.

“The primary concern is that consumer do not know about the legal principle and our office, which means that majority of consumers are paying for debts that have prescribed, and are therefore legally no longer collectable by creditors.”

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Complaints about prescribed debt

Between January 2021 and July 2022, the ombudsman received and investigated a total of 193 complaints relating to allegations of collections on prescribed debts by banks and an amount in excess of R1 million was written off or repaid to consumers.

During last year, the ombudsman received 118 complaints and in about 33% of these cases, found that the banks in question were unlawfully collecting or attempting to collect on prescribed debts.

So far the ombudsman has received 75 complaints since the beginning of the year. In 29% of these cases, banks have again been found to have transgressed the Prescription Act as well as the NCA, while an amount of R216 197 was written off in one case and the complainant was also refunded the R3 200 which he paid towards the prescribed debt.

However, Steyn says, this does not mean that consumers are now encouraged to stop paying their debts. “In the majority of the cases, the ombudsman still found in favour of the banks. The debts in matters where we found in favour of the bank, had not prescribed and the outstanding balances had drastically increased from the original debt or balance due to the arrears as well as the additional legal fees.”

Prescribed debts in law

The Prescription Act, read with section 126B of the NCA, stipulates that a debtor’s liability to pay a specific debt to a creditor is extinguished after a prescribed time period.

This means that generally, contractual and civil debts are terminated if you do not pay or acknowledge the debt you owe to the creditor for a period of three years from the date when the payment was due.

However, Steyn points out, there are exceptions where the prescription period for certain contractual and civil debts, is longer, such as a bank’s claim for the repayment of a debt based on a court judgment and claims for home loan debt that only prescribe after 30 years and not three years.

Therefore, whether it is legal or illegal for creditors to collect on a prescribed debt depends on whether the debt falls within the ambit of the NCA or not.

This means that you have to see if the debt relates to a credit agreement and falls within the definition of a credit agreement as described in the NCA, such as overdraft facilities, mortgage loans, personal loans, or credit card debt and vehicle finance agreements.

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When prescription does not apply

The protections the NCA offers does not apply to all agreements, and therefore it is still legal for creditors to demand payment or call consumers to get them to acknowledge a prescribed debt and even institute legal proceedings for agreements falling outside the NCA.

“It is important for consumers to be aware of the fact that, once they have acknowledged owing the debt, even if they have paid, they will not be able to successfully use the defence of prescription in court,” says Steyn.

In terms of the NCA, the banks and other creditors are prohibited from collecting or selling prescribed debt.

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When prescription is interrupted

Prescription is interrupted, according to the Prescription Act if, during the three years after the payment was due if:

  • The consumer admitted, verbally or in writing, to owing the debt
  • The consumer made a payment towards the debt or
  • The creditor issued and served a summons on the consumer.

Steyn advises consumers in cases where this has not happened, to raise prescription and if the creditor continues to demand payment or take any other steps to collect the debt, file a complaint with the ombudsman’s office.

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