Consumers have two defences in common law that they can use if relevant.

PRESCRIPTION

If the last time that a consumer paid any money on the account is more than 3 years ago, and they have not admitted that they owe the money, the consumer can claim that the debt has prescribed. This means that the creditor has the right to ask for the money, but the consumer can raise the defence of prescription and refuse to pay the remaining balance on the debt.

So if a consumer receives a call or a letter on an old debt, always ask for a full statement to see when the last payment was made. Also ensure that the consumer does not pay any money until you have investigated if prescription applies – if they pay even R50, prescription will be “interrupted” and another 3 years will pass before the claim prescribes.

NOTE: Prescription does not apply if judgment has been taken for the debt.

If a claim has prescribed, the negative listing must be removed from the credit bureau records in terms of the National Credit Act.

IN DUPLUM

If the interest on an account is more than the amount owing at the time that the consumer defaults, they can claim that some interest must be written off in terms of the in duplum principle that the interest may not be more than double the outstanding amount charged at the time of default.

So if a consumer takes a loan of R5 000 and defaults when the balance is R4 000, then the balance on this account may never be more than R8 000 (double R4 000). Under the common law (which applies to credit before the National Credit Act, i.e, before 1 June 2007), interest can continue to be charged on the account so long as the balance never goes above R8 000.

When a judgment is taken, in duplum starts to be calculated again. For example, if judgment was taken at R7 200 the balance may accumulate again until the consumer defaults, and then the in duplum rule will mean double the balance at the time of this new default.

The common law in duplum rule was not much help to consumers but you should look out for a balance that is over the in duplum maximum amount, so you can at least help to get the balance reduced.

Under the National Credit Act, the in duplum principle has been made part of the Act, and the new in duplum is much stricter. Now when a consumer defaults, the consumer may not be charged more than double the balance at the time of the default. For example, if the balance is R4 000 at the time of default, the consumer only needs to pay R8 000 more (this includes interest, legal fees, insurance and any other charges). This is a big help in reducing the final amount that the consumer must repay, and it applies even if judgment has been taken.

IMPORTANT

When you are helping a consumer with an account, always ask for a full statement from the beginning and check for in duplum and prescription.