The effect of Section 126B of the National Credit Act on Prescription of consumer debts

Siphenathi Ngcoko

The prescription of debts arising from consumer credit agreements is regulated by the Prescription Act 68 of 1969 and the National Credit Act 34 of 2005. Extinctive prescription entails that if a creditor neglects to claim payment on a debt for a period of 3 years then that debt ultimately falls away. In practice, this only succeeds when the debtor and/or his legal representative raises prescription as a defence in legal proceedings.


Section 126B of the National Credit Act provides that no person may sell and collect a debt under a credit agreement to which this Act applies and that has been extinguished by prescription under the Prescription Act. Furthermore, no person may continue the collection of a debt under a credit agreement where the consumer raises prescription or would reasonably have raised the defence of prescription had the consumer been aware of such a defence.

This section was introduced to curb the abusive practice that existed where credit providers and debt collectors were continuously collecting prescribed debts and tricked consumers, who were unaware of the law regarding prescription, into making payments on their prescribed debt in order to reactivate these debts.

Section 126B(1)(b) at first sight makes it impossible to collect prescribed debt that falls under the National Credit Act. However, there are qualifications to this prohibition. One being that, for example, if the debtor/consumer is made aware of the defence of prescription but deliberately fails to invoke prescription in terms of section 17 of the Prescription Act and continues to make voluntary payments, even if the debt has prescribed, the performance may be regarded as due performance in terms of section 10 (3) of the Prescription Act.


In paragraph 20 in the case of Kaknis v Absa Bank Limited & Another, the court held that the defence of prescription ought to be raised in response to a demand by the credit provider. It can be raised during proceedings. The court held further that, if the consumer was aware of the defence of prescription, he should raise it, but if he was not aware, the consumer must show that he would have reasonably raised it.

In terms of section 17 of the Prescription Act, in order for the consumer/debtor to benefit from the defence of prescription, he must raise the defence of prescription by filing the relevant legal documentation to plead such. ‘’A court will not out of its own motion take notice of prescription’’ but may allow the prescription to be raised at any stage of the legal proceedings. It is submitted that the second qualification under section 126B(1)b)(ii) of the National Credit Act extends the rule under section 17 of the Prescription Act to some extent: the prohibition of the collection of prescribed debt does not apply only when a defence of prescription has been invoked under section 17 of the Prescription Act but also when a consumer would reasonably have raised the defence of prescription had the consumer been aware of such a defence.

The aforementioned phrase raises uncertainty and is vague. It is submitted that the Legislature intended to leave some discretionary powers to a presiding officer, where a consumer/debtor who has failed to raise the defence of prescription – for a presiding officer to take notice of such prescription. However, for legal practitioners, this provision is vague and can be taken up for oral arguments in court. It is for this reason that the Legislature has drafted the Prescription Bill, for it to address and remove any uncertainties pertaining to judicial discretion when it comes to the failure of the consumer to raise the defence of prescription. ‘’The draft Prescription Bill will change the need to specifically raise the defence of prescription’’. Clause 13 (4) of the Bill states that the court during judicial proceedings must consider prescribed debts, meaning step into the shoes of the consumer/debtor and raise the defence on their behalf.


The Legislature needs to take cognisance of two issues when finalising the Prescription Bill; that although the main purpose of the National Credit Act is the protection of consumers/debtors, their rights must be balanced against the rights of credit providers. Judge Shongwe JA in the case of Kaknis v Absa Bank Limited & Another highlighted same and cross referenced it to the case of Kubyana v Standard Bank of S.A Ltd. In paragraph 21, he emphasized that in promoting protection and equity in the credit market, the rights and responsibilities of credit providers and consumers must be balanced to achieve sustainability.


Another concern is that consumers may in certain instances abuse the defence of prescription simply to abuse legal proceedings, in that instance, will a credit provider be able to enforce debt after a court finds that a debt has not prescribed and that section 126B has not been transgressed?

It is therefore clear from the above mentioned that while the National Credit Act continues to regulate and prohibit certain behaviour in relation to prescribed debts, the Prescription Act still regulates the prescription periods and judicial discretion is something that still needs to be properly legislated. We are yet to seek clarity from the amendments in the Prescription Bill once the President assents to it and it becomes binding Legislation.