Receiving a call from a debt collector can be overwhelming and stressful. It’s natural to want to avoid the situation, but ignoring these calls or letters could actually make things worse, especially when it comes to your credit score and long-term financial health. The important thing to remember is that you have rights as a consumer. By understanding those rights and taking the right steps, you can manage collections accounts effectively without causing unnecessary harm to your credit profile or financial future. Let’s unpack.
1. Understand What a Collections Account Is
When you miss payments, your credit provider may either use a debt collection agency to recover the money or sell your debt to a debt purchaser. Once this happens, you owe the collector, not your original creditor. Under South Africa’s National Credit Act (NCA), debt collectors must follow strict rules before they can list you with a credit bureau.
2. Know Your Rights Under the National Credit Act (NCA)
The National Credit Act (NCA) protects you from unfair credit practices, including how and when you can be listed with a credit bureau for missed payments. Before a debt collector or creditor can list you for non-payment, they must follow specific legal steps to ensure the process is fair and transparent.
Here’s what you should expect:
- You must receive a written notice of default. This means the creditor or collector must send you a clear, formal letter explaining that you have missed payments and are in default. This notice gives you the opportunity to understand your situation and what is owed.
- You must be given reasonable time to respond or pay the debt. After receiving the default notice, you’re entitled to a reasonable period to either dispute the debt, negotiate, or settle the outstanding amount before any adverse listing is made. This period is designed to give you a fair chance to fix the situation.
- All fees, penalties, and charges must be clearly explained upfront. You have the right to know exactly what extra costs, such as penalty fees or interest, are being added to your debt. These charges must be legitimate, transparent, and in line with your original credit agreement.
If any of these important steps are skipped or not handled properly, the listing on your credit profile could be unlawful. This means you have the right to challenge the listing and ask for it to be removed. Ensuring these protections are followed helps safeguard your credit record and prevents unfair damage to your financial reputation.
3. Check Your Credit Report for Free
You’re entitled to one free credit report from each credit bureau every year, so be sure to check yours regularly to see if the debt is listed, verify the amount and details, and spot any incorrect information. If you find errors, promptly lodge a dispute with the bureau—they are required to provide you with a reference number and resolve the issue within 20 business days.
4. Always Verify the Debt First
Not every collection is valid. Protect yourself by asking for:
- Written proof of the debt
- Confirmation that the amount is correct
- Proof that the debt hasn’t prescribed (expired after 3 years without payment or acknowledgement, in most cases)
Only make payment once you’re sure it’s legitimate.
5. Negotiate Before You Pay
If the debt is valid but you can’t pay it all at once, consider negotiating an affordable payment plan or ask if they’ll accept a settlement discount for a lump sum payment. Always make sure to get every agreement in writing before making any payments. Paying off a collection can help improve your credit standing over time—especially if the status on your credit profile is updated to show it as “Paid” or “Settled.”
6. Avoid Debt Collection Scams
Avoid debt collection scams by being alert to common red flags such as collectors refusing to provide company details, pressuring you to pay via vouchers or money transfers, threatening arrest (which is not a legal consequence for debt in South Africa), or demanding your banking details over the phone. If you’re unsure about a collector’s legitimacy, hang up and verify with your original creditor or the National Debt Collection Council. If you believe a debt collector has listed you unfairly or hasn’t followed legal procedures, take action by disputing the listing with the credit bureau first. If the issue isn’t resolved, you can contact the Credit Ombud for free assistance. The Ombud has the authority to investigate and order the removal of incorrect listings, helping protect your credit profile. For support, call the Credit Ombud at 0861