In South Africa, debt collection is a legal process that follows strict regulations, but there are many myths surrounding it that can lead to confusion. Below are some common debt collection myths debunked:

1.  Myth: Debt Collection Is Not Worth the Effort

Fact: Even if you’ve been unsuccessful in recovering debts so far, it is still possible to recover the money.

• Small amounts owed can add up to a significant total, which can have a major impact on your business, either positively or negatively.
• Debt recovery is essential, and hiring an attorney can increase your chances of a successful settlement. Debtors often take legal threats more seriously than informal requests.
• In many cases, debtors will settle after receiving a formal notice from an attorney, which highlights the importance of professional intervention.

2.  Myth: Only Big Companies Use Debt Collectors

Fact: While large companies often use debt collectors, smaller businesses can benefit greatly from debt collection services as well.

• Small businesses are often more financially vulnerable and should consider using an attorney to recover unpaid debts. This can help ensure cash flow is restored and protect the business from financial strain.
• Attorneys have the necessary skills and resources to help businesses of all sizes collect debts, even negotiating payment plans that can improve cash flow.

1. Myth: Debt Collectors Can Enter Your Home Without Permission

Fact: Debt collectors cannot enter your home without your permission. They do not have the right to force entry or seize your property unless they have a court order or a warrant from the sheriff. If a debt collector threatens to enter your home without consent, it is illegal.

2. Myth: Debt Collectors Can Take Your Personal Belongings Without a Court Order

Fact: Debt collectors cannot take your personal belongings without a court order. They must follow a legal process, which involves obtaining a judgment from the court before they can seize any assets. Only after the judgment is made can they apply to the sheriff to seize goods for sale at an auction.

3. Myth: If You Ignore Debt Collectors, They Will Go Away

Fact: Ignoring debt collectors will not make the debt go away. In fact, it may worsen the situation. If you fail to respond to debt collection efforts, the creditor can take legal action against you, leading to a court judgment, garnishment of wages, or even asset seizure. It’s important to address the issue as soon as possible.

4. Myth: Debt Collectors Can Garnish Your Wages Immediately

Fact: Debt collectors cannot garnish your wages immediately. They must first obtain a court order that allows them to do so. Once the court has issued a judgment in favor of the creditor, they can apply for a garnishment order, which is then served to your employer. The garnishment is typically limited to a percentage of your salary, and the amount is regulated by law.

5. Myth: Debt Collectors Can Charge You Any Fees They Want

Fact: Debt collectors cannot charge arbitrary fees. There are legal limits on the fees that debt collectors can charge for their services. The National Credit Act (NCA) and other regulations set guidelines for collection fees, and any charges must be reasonable and justifiable. If a debt collector charges excessive fees, they may be violating the law.

6. Myth: Once a Debt is Written Off, It’s Gone Forever

Fact: Even if a debt is written off by a creditor, it doesn’t mean it is gone forever. The debt may still be legally enforceable, and creditors can sell the debt to collection agencies. If a debt is written off, it may still appear on your credit report, affecting your credit score and making it difficult to obtain credit in the future.

7. Myth: You Can’t Negotiate with Debt Collectors

Fact: You can negotiate with debt collectors. In many cases, debt collectors are open to negotiating a payment plan or settlement. If you are unable to pay the full amount, they may be willing to accept a lower lump sum as full settlement or work out a manageable repayment schedule. It’s important to communicate and make arrangements as soon as possible.

8. Myth: Debt Collectors Can Call You Anytime, Day or Night

Fact: Debt collectors are restricted by law regarding when and how often they can contact you. Under the National Credit Act, they can only contact you between 06:00 and 20:00 on weekdays and 08:00 to 13:00 on Saturdays. They are not allowed to contact you on public holidays, Sundays, or at unreasonable hours. If they do, you have the right to lodge a complaint with the National Credit Regulator (NCR).

9. Myth: If You Don’t Have the Money, You Can’t Be Taken to Court

Fact: Even if you are unable to pay, creditors can still take you to court. A court judgment can be made against you, and if you still fail to pay, the creditor can take further legal action, such as garnishing your wages or seizing assets. It’s important to communicate with creditors and seek legal advice if you are in financial difficulty.

10. Myth: Debt Collectors Can Harass or Threaten You

Fact: Harassment and threats are illegal. Debt collectors are prohibited from using threatening, abusive, or unfair tactics to collect a debt. They cannot threaten violence, public humiliation, or legal actions they have no intention of pursuing. If you feel harassed, you can file a complaint with the National Credit Regulator (NCR) or the Credit Ombud.

11. Myth: If a Debt is Older Than 3 Years, You Don’t Have to Pay It

Fact: While debts may become prescribed after three years of no payment or acknowledgment, this does not automatically mean you are off the hook. If the creditor takes you to court before the prescription period ends, you may still be liable for the debt. It’s important to know the legal timeframes for prescription and consult a lawyer if you are unsure.

12. Myth: Debt Collectors Can Take Your House or Car Without a Court Order

Fact: Debt collectors cannot take your house or car without a court order.

• They must follow a legal process, including obtaining a judgment from the court, before they can seize any property.
• If you own a home or car, they can only be seized if they are deemed non-exempt assets after a court order has been obtained.

Recovering Debt from an Overseas Client Isn’t Possible

Fact: Although international debt recovery can be more complex due to jurisdictional issues, it is still possible.

• Experienced debt collection attorneys often have established networks with international law firms and debt collectors, which can help recover debts from clients abroad.
• With the right legal expertise, even cross-border debt recovery can be successfully managed

Conclusion:

Debt collection in South Africa is governed by strict laws to protect both creditors and consumers. Many myths surrounding debt collection can lead to confusion and unnecessary stress. It’s important to know your rights and obligations and to seek legal advice if you are unsure about any aspect of debt collection. If you’re facing debt issues, addressing them early and seeking professional help can prevent escalation and protect your financial future.