New credit act provision does not protect historical prescribed debt
The Supreme Court of Appeal has ruled that the new provision in the National Credit Act that prohibits the collection of previously uncollected or prescribed debt has no retrospective application.
Section 126B(1)(b) of the act, which came into effect in March 2015, prohibits the collection or reactivation of a debt that has been extinguished by prescription under the Prescription Act 68 of 1969.
The judgment, which was released in December, could have significant consequences for consumers with debt agreements preceding the date the provision came into effect.
The consumer in this particular case, Pantelis Kaknis, had used this provision as his defence after his credit providers, Absa Limited and Man Financial Services SA, issued summons.
The local division of the High Court in Port Elizabeth dismissed his defence and said the provision did not apply retrospectively. Kaknis appealed to the Supreme Court of Appeal.
Kaknis entered into agreements with Absa Limited between 2006 and 2008. In 2010, Kaknis applied for debt review in terms of which his obligations to his various credit providers were rearranged. Kaknis made his last payment on July 8 2011.
The debt prescribed on July 8 2014 as more than three years had passed since his last payment. On October 3 2014, Kaknis concluded an acknowledgement of debt to Absa and Man Financial Services.
In dismissing the appeal, the majority court of the Supreme Court of Appeal held that 126B(1)(b) of the act had no retrospective operation and provided no defence to Kaknis. The majority found the section was not intended to take away or impair vested rights acquired under existing laws.
In a dissenting judgment, Judge Jeremiah Shongwe held that the provision was intended to prohibit credit providers from benefiting from prescribed debts and was aimed at protecting “poor” consumers from enforcement of such debts.
He said a failure to recognise this “would be at odds with the trend set by the Constitutional Court where it emphasised the protection of the consumer”.
COURT FOUND THE SECTION WAS NOT INTENDED TO TAKE AWAY OR IMPAIR VESTED RIGHTS ACQUIRED UNDER EXISTING LAWS