This is our OUDS survival guide on how to fight zombie debt, better known as prescribed debt in South Africa.
Zombie debt refers to old debt which is purchased by debt collectors hoping to intimidate or scare consumers into paying very old debt. If you’re contacted by a debt collection agency about an old debt (we’re talking older than 3 years), don’t give in immediately. You have several methods at your disposal that you can use to fight back and we’ll give you advice on “HOW TO DO JUST THAT!”
Background on how zombie debt works
The Prescription Act provides that the basic period of prescription lasts for 30 years in respect of any “Judgement of debt” granted against you; and 3 years for “any other type of debt” i.e. store account, cellular account etc…
The effect is that in the case of “any other debt” where no payment has been made for a period of 3 years, the debt has “prescribed”. This means that the period of time that a debt collector/credit provider had to recover this debt has now completely expired, and does not have to be paid.
What in essence the Act of Prescription is saying is that 36 months (3 years), is more than enough time to proceed with steps for the recovery of a debt and the issuing of legal judicial methods such as the issuing of a Judgement etc…
If the collection agent/creditor has not endeavoured to do so over this period of time, then the blame lies upon them and not the consumer. Ergo the debt is to be written off due to lack of due diligence.
The prescribing of debt should not be confused with “debt written off” by creditors. In many instances upon Credit Bureau reports the following statement will show “Debt written off”. One needs to understand that the legal right to collect debt is retained by Credit providers even if they have written the debt off.
For example a creditor maybe decides after a year that it’s just not worth the time and cost to proceed with collection methods to collect on an R100 outstanding account. So they mark their system as “Debt written off” and notify the credit bureaus of the updated status as per the National Credit Act. Along comes a debt collection firm and says that they are prepared to collect on the creditors “bad book” and they only expect to be paid on the debt they collect upon. So the creditor, feeling they have nothing to lose, hands over their “bad book” portfolio to the debt collection firm. Now that “R100” account forms part of this “bad book” as its debt never paid, and soon the consumer is getting contacted by debt collectors. Oh! And that R100 account may even be as big as R200.00 now due to the debt collector charging legal recovery fees upon the outstanding account which they live to do as this is how they make their money.
This though issue causes confusion for the consumer though, because on the consumer looks at their credit profile and they see “debt written off”, but what they do not understand is that this debt can be revisited before the debt legally prescribes. If the debt had prescribed, the consumer would have seen a “debt prescribed” status upon their credit bureau report, and “THEN” it would be illegal for the debt collection company to try and collect upon the debt.
In many cases, it’s a common practice these days in South Africa, creditors sell their “debtor’s book” to debt collectors, who then collect upon the debt. These debt collectors main goal is to collect more than what they have paid for the debtors Book. When they phone consumers, they often persuade them to make a small payment.
Their clever reason for this is that any payment, amount does not matter, creates an interruption in the prescription process; or simply put the clock resets. When this is done the prescription period will restart from day one again (another 3 years have to pass) and the consumer is obliged to pay the debt in full now. This also now gives the debt collectors the opportunity to take more serious legal collection methods, such as obtaining a Judgement against the consumer.
Any written acknowledgment of debt received from the consumer will have the very same effect. Any expressed, implicit or implied acknowledgement of liability of the debt by the consumer will create an interruption of the prescription period. So “NEVER EVER” acknowledge debt off hand, rather seek professional advice from us first.
WHAT TO DO
If you are suddenly approached with a demand for an old debt, especially if the debt collector refuses to provide documents proving such, tell them in written correspondence, that the debt has prescribed and that unless they can prove otherwise, they must close your file and cease further collection methods. If they harass you, demand to see proof of the debt: the original contract baring your signature, proof of the date of default (full account statement where the last payment can be seen upon the account), the handover amount and a breakdown of all the costs incurred. Costs and interest may not exceed the handover amount; this is referred to as “In Duplum”. And a creditor or debt collector may not list a prescribed debt on your credit record as unpaid account or any “bad” status thereof.
When you receive a call and you are sure it relates to a debt older than 3 years, and where you have made no payment during the last 3 years and you have signed no acknowledgement of debt during the last 3 years, you should not confirm or acknowledge anything, sign nothing and pay nothing. Your only reply should be “The Act of Prescription applies …..Good bye”. If you are unsure, ask an expert before you do anything – SPEAK TO OUDS WE’RE HERE TO HELP
Example: The phone rings and the collection agent on the other end informs you that you have not paid your debt. You have no idea what debt he is talking about and the person on the other end says “Just pay R100.00 that’s all we’re asking for”.
This is an old trick used by Debt Collectors to collect zombie debt, don’t agree to anything and definitely do not give any form of confirmation be it written, emailed, verbal or otherwise!
In most instances, debt collectors collect for their own account, and very often they counter Claims of Prescription. Some agents will simply say: “Your information is not correct you have to pay”. Others will come with a more sophisticated response such as this one: “Kindly be advised that a claim of prescription will not exonerate you from the debt”. The simple truth is that if a debt has “prescribed”, it is not merely dormant – it has been completely extinguished – except if prescription is interrupted by a payment or acknowledgement of debt.
Invoke the Statute of Limitations –Act of Prescription
The statute of limitations – Act of Prescription on debt is the maximum time the debt collector can use the courts to collect a debt from you. The time period varies dependant on the type of debt it is and starts on the last date of activity on the account i.e. the last time the account was paid by you.
These are examples of debt which can become prescribed if the correct rules are followed:
Retail accounts, credit card accounts, Telkom accounts, personal Loans / Pay day Loans, gym memberships, cellphone accounts, monies owed on vehicle finance.
- 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.
Even though the statute of limitations has expired, the debt collector may still call you or may even file a legal suit against you in court. The onus falls on you to prove that the account the debt collector is trying to collect on is indeed “prescribed”.
To stop calls, send a cease and desist letter, see below, to the debt collector asking them to stop contacting you.
If the collector files a legal suit against you, attend the hearing prepared with evidence that the statute of limitations on the debt has indeed expired (prescribed). Consult with an attorney for additional legal advice and representation.
Demand Debt Validation/Proof
You have the right to verify debts from debt collectors. The responsibility lies on the debt collector to prove that the zombie debt is in fact yours.
You can request the validation/proof of zombie debt in two ways. When contacted you request that the debt collector sends you the proof of debt, via post or email, in the form of a current statement provided from the client they are representing, i.e. if it’s a credit card then the statement must be from the bank they are representing “NOT A STATEMENT GENERATED BY THE COLLECTION COMPANY ITSELF!!!”
It is also highly advised that you request a copy of the original contract thereof as proof that you’ve personally signed for the credit agreement.
You can also take the particulars of the debt collector down and send an email (read receipt such) or a letter requesting the collector to validate your zombie debt. Your request for validation must be made in writing. Sending your request via certified mail with return receipt requested gives you extra proof and a way to track that your letter was received.
The validation the collector sends you in response needs to include some documents from the original creditor proving you owe the debt, the amount you owe is valid, and the agency is allowed to collect the zombie debt from you.
IMPORTANT: “ALL” debt collectors need to be registered with the Association of Recovery Agents (ADRA) and openly provide you with their registration number. Be advised that the collection company is not registered under one membership number, but all agents of the debt collection company have to have their very own registration number. If any “debt collector” approaches you and they do not have a debt collectors registration number be advised that they are then collecting illegally and you are within your rights to report them to ADRA.
Note: Attorneys firms do not require registration with ADRA, hence there are many legal firm that specialize in debt recovery. This does not mean that they are above the laws of responsible debt collection though! They have to follow the same legal collection process like everybody else.
Send a Cease and Desist Letter
You have the right to request the collector to stop contacting you. By sending a written cease and desist letter to the debt collector, you can have the collector stop communicating with you about the debt altogether, regardless of whether the debt is legitimate or within the statute of limitations.
Like your debt validation letter, the cease and desist letter should be sent via certified mail with return receipt requested. If the collector ignores your cease and desist letter, you can take legal action.
Initiate a Credit Report Dispute
If you’ve requested validation of the debt and the collector has failed to respond to the request or hasn’t sent sufficient proof that the debt is valid, the collector cannot legally add the debt to your credit report. Consumers have a right to a free credit report every year from all credit bureau. If you find a listing for a prescribed debt, you are entitled to lodge a dispute with the credit bureau.
In either of these cases, you can have the account deleted from your credit bureau report by submitting a credit bureau report dispute.
The case for the dispute is stronger if you include a copy of your debt validation letter along with the certified and return receipt requests and cite in your letter the collector’s failure to provide proof of the debt.
If you are finding yourself in this situation where you have been contacted by a debt collector on an account three years old or longer; and unsure as to how to proceed
TALK TO US!!!
WE CAN HELP!!!
Remember above all else that you are not alone out there. Contact OUDS directly for more information on our effective Prescription Debt Investigation process OR any of our other offered Phalanx© services.