Debt buying in SA

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Tweefo (June 07, 2016, 07:39:47 AM):
Last week Tonight's Debt episode brought back some unpleasant memories for me. For a few years after I went bankrupt, I got similar calls. In one case it went through 3 or 4 different firms before they stopped trying. Are unpaid debts ever "forgiven" here in SA?
Mefiante (June 07, 2016, 08:31:43 AM):
Are unpaid debts ever "forgiven" here in SA?
Yes, they are, in most cases after three years. But—and this is the critical factor—the debtor has not in any way acknowledged the alleged debt for that period. With home loans the prescription period is 30 years. The National Credit Act also includes the so-called “in duplum Rule” for defaulting debtors. This provision mandates that a credit provider may at no point ever claim more than twice the original capital amount. That is, the creditor must cease adding interest and administration fees once the total reaches twice the amount that was originally borrowed.

Faerie (June 07, 2016, 09:07:54 AM):
The laws have become tighter in last few years, I still received calls for 15 year old debt as late as last year (had a similar life experience as you). They are no longer allowed to hound you as they used to and as Mefi sez, as long as you dont acknowledge the debt after the three year period, they can do squat, they will still try though, I just tell them they have the wrong number and eventually they remove the number off their systems or give up or whatever.

They do love to threaten you with your credit profile, but I've had them chucked off mine with a simple email to ITC/Experian citing prescribed debt who in turn then blacklist them against your profile and they cannot list you without your knowledge.

Its not a nice feeling though, remember my stress levels and blood pressure when the phone rang....
BoogieMonster (June 07, 2016, 09:54:45 AM):
When I last moved, I somehow scored a landline number that had previously belonged to a defaulter. That was 5 years ago.

We get debt collection calls for that person to this day. For ex: 7am on a sunday morning when I'm still in sleepy-land the phone will ring, and of course if you point out the have the wrong number they climb down your throat for lying. I've become adept at hanging up on these morons.

Legally they can't, but oh hell do they try.

I'm a fan of John Oliver, and I have to say I was shocked that he could buy $15m dept off for just $60k. I really sometimes hate this morality shit that I have. However it got me thinking... I wonder how ethically you could go about, say, only collecting $120k off of the $60k. You'd think people would jump at the opportunity if you offered to clear their hospital debts at a huge discount. However being bad debt to start with, I question whether most of these people would be willing to even meet you 1/10th of the way. Would be a lucrative form of charity though... Sometimes the best outcomes are where everyone wins.
Mefiante (June 07, 2016, 10:48:45 AM):
There are several debt collection companies in SA that specialise in buying up bad and/or written-off debt, typically in the retail space (Edgars, Woolworths, Joshua Doore, etc.) and unsecured lending space (African Bank, Capitec, Direct Axis, etc.) where individual debt amounts are relatively small. The original credit providers in many cases don’t have the required infrastructure to collect from persistent and/or repeat defaulters. There comes a point, after much effort has been expended on attempts to collect, when the likelihood of collecting on a particular debt becomes too low, and the associated collections costs too high, for pursuing the debt to be profitable. At that point, the credit providers usually write the debt off so as to meet GAAP accounting standards, and offer on auction an ensemble of such debts incurred by similarly behaved debtors at roughly the same time in similar amounts (a so-called “book”).

The collection company that is interested in the book will usually do an evaluation exercise to determine a reasonable offer, based on debt history, debtor characteristics, nominal book value and its own success with similar books it chased down in the past. The offer is normally in the range from 3% to 12% of the book’s nominal face value, so buying a book nominally worth $15m for $60k (i.e., 0.4%) is remarkably low. The original credit provider will then award the book to the preferred bidder, usually the highest one.

As far as the morality of these practices goes, let’s rather not go there. The stench is overwhelming—on both sides of the debate.



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