Car Loans and Prescribed Debt
Vehicle Finance & Prescription
Many consumers have become aware that if you do not make payment on a debt nor acknowledge the debt with a credit provider for 3 years, and they fail to sue you for the credit, the debt “prescribes”.
This means that the debt can no longer be collected by the credit provider. The debt has died. They missed their window of opportunity to collect more funds from the consumer. The credit provider should have served a summons and gone to court during this time if they were serious.
Some wonder how this applies to vehicle finance.
While it is possible that the situation may come up (however unlikely) that the bank forgets to take the matter to court after so many missed payments, there is a slight difference with vehicle finance compared to other forms of credit.
‘When a consumer takes finance to pay off a car, the vehicle actually belongs to the bank during this time.’
When a consumer takes finance to pay off a car, the vehicle actually belongs to the bank during this time. Only once the total is repaid will the papers be signed over to the consumer.
So, if a consumer defaults on debt repayments and somehow the debt prescribes, the credit provider would lose their right to collect the finance amount. What they would not lose is their right to repossess their vehicle which the consumer is simply driving around in.
Just something to keep in mind should the situation ever arise.
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