Recovering prescribed debts - Section 126 of the National Credit Act

Section 126B(1)(b) states, inter alia, that no person may continue to collect or re-activate a debt under a credit agreement to which the NCA applies: 

(i)  which has been extinguished by the Prescription Act, No 68 of 1969 (Prescription Act); and 

(ii) where the defence of prescription is raised, or would have reasonably been raised, had the consumer been aware of such a defence, in response to a demand, whether as part of legal proceedings or otherwise. This section came into operation on 13 March 2015.

In this case, Kaknis concluded various Instalment Sale Agreements (Agreements) with ABSA. However, over time, Kaknis encountered financial complications which, in turn, affected his ability to pay in terms of the Agreements. It is noted that on 8 July 2014, the claim against Kaknis prescribed, nevertheless, on 3 October 2014, Kaknis concluded an acknowledgement of debt in favour of ABSA, which in essence purported to revive the debt in terms of the Agreements. In the court a quo, Kaknis averred that the claim prescribed and that s126B(1)(b) of the NCA, prevented ABSA from collecting the debt. 

Considering the fact that s126B(1)(b) only came into effect on 13 March 2015 and the debt was revived on 3 October 2014, the court a quo held that the section had no retrospective operation and granted summary judgment in favour of ABSA.

Kaknis appealed the decision of the court a quo. 

The dissenting judgment, whilst not law, upheld the appeal for the following reasons:

1. the court a quo minimised the protection of consumers and overemphasised the undue certainty in commercial transactions;
2. the intention of s126B was to prevent a credit provider from benefiting from a debt which had prescribed, unbeknown to a naïve and vulnerable consumer;
3. should s126B not apply retrospectively, the legislature would have failed to reconcile the trend set by the Constitutional Court, which was to emphasise the protection of the consumer;
4. agreements entered into before the commencement of s126B would be afforded less protection than those agreements entered into after its commencement, thus creating a differentiation between classes of consumers; and
5. the principle against the retrospective operation of the law is not absolute.

The SCA, in its majority judgment, used the following legal principles, in relation to enactment of new laws, in dismissing the appeal with costs:

1. no statute is to be construed as impairing vested rights which were acquired under existing laws, unless it is clearly intended by the Legislature for the statute to have that effect;
2. it is the rule of law that legislation will only affect future matters; 
3. where there is doubt about the retrospective effect of a provision, the presumption against retrospectivity is irrebuttable; and
4. the protection that the NCA affords consumers must be balanced against the rights of the credit providers.

Accordingly, the majority of the court found that s126B(1)(b) has no retrospective application in respect of debts incurred prior to 13 March 2015. 

Therefore, where loan agreements were entered into prior to 13 March 2015 to which the NCA applies, the consumer borrowing the money, whose debt has prescribed and subsequently revived, will be unable to rely on the provisions of s126B(1)(B).