Selling ‘Bad debts’
Question:-
I used my credit card and unfortunately, was unable to repay. I have now incurred interest and legal fees etc. I have the money to repay it, but my debt has been sold by the bank to a debt collector, who in turn sold it to another.
My question is as follows:
1. If the creditor has disposed of this debt by selling it to the third party,
1.1 Was the sale valid?
1.2 Am I now bound to pay this party?
If yes to the above, then:
2. Can I negotiate with this third party to lower the debt, considering that they purchased it for probably 10-20% of the value of the original debt.
If the answer to question one is NO, then:
I have approached the bank and they say that the debt is no longer with them, hence it is not possible for me to pay them.
The reason for asking is because, legally (in South African law), the debt has prescribed so I don’t have to pay it. That being said, I acknowledge that Islamically I am required to pay it off, hence my attempt to settle it. The reason for my question is follows.
1. The debt collector that the bank sold the debt to, refuses to send me a statement showing how they arrived at the figure owing.
2. I have searched for similar cases online and have found a website that says we should never pay these people, because they never consider the debt written off. They will continue to send you demands for payment even after you have settled it, and continue to add bogus charges to the original debt.
https://mbdvictim.wordpress.com
This is the link to the website regarding the tricks of the debt collectors. (This is the same debt collector that has contacted me).
If I cannot get a settlement letter from the bank or from the third party, what do I do?
Answer:-
1. It is not permissible to sell a debt to a third party in terms of Shariah.
لا ينبغي للرجل اذا كان له دين ان يبيعه حتي يستوفيه لانه غرر فلا يدري ايخرج ام لا يخرج (الموطا لامام محمد ص354)
2. In terms of South African law, sale of ‘book debts’ are permitted, as recorded in credit agreements which creditors and debtors agree upon. Hence, you have no choice but to pay the company that purchased the debt in terms of the law. If you have the choice of settling the matter directly with the bank, then you should settle the matter with the bank directly, but you stated in your query that this option does not exist.
3. There is no problem in negotiating with the ‘new creditors’ to have the interest and additional fees or charges reduced.
4. You must demand that a statement is sent to you first, and thereafter you may negotiate the final payment with them, and finally submit payment. You should continue reminding them to send the statement until you finally receive the statement. Payment should be delayed until the statement is received. As long as you keep requesting a statement, they cannot call or blacklist you as you are willing to settle the account. If they do, you may defend yourself in court. However, you should settle the matter as soon as possible, as the outstanding amount is a debt upon you, for which you are liable.
5. Finally, you should repent for borrowing money on interest and refrain from doing so in future.
ALLAH TA’ALA KNOWS BEST!
ANSWERED BY:
Mufti Mohammed Desai
Date: 02 Shabaan 1444 / 23 February 2023