The Prescribed Rate of Interest Act, Act 55 of 1975 (“the Act”) prescribes a maximum rate of interest that can be charged by a creditor on a debt, if the interest is not governed by an agreement, any other law or trade agreement.
In 1993, the Minister of Justice set the prescribed rate of interest at 15.5% per annum. On 1 March 2020, the prescribed rate of interest was changed by the Minister of Justice and Correctional Services in consultation with the Minister of Finance in terms of Section 1(2) of the Act and the new rate of 9.75% per annum came into effect.
What this means is that any debt which falls under the scope of the Act and which started bearing interest on or after 1 March 2020, only bears interest at a rate of 9.75% per annum. All debt which falls under the scope of the Act and which started bearing interest before 1 March 2020, bears a different interest per annum.
Take note that the interest is simple interest calculated on an annual basis (i.e per annum), and only on the original capital amount that was owed.
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