New Regulation to Curb Reckless Lending


To curb reckless lending, a new regulation has made it compulsory for all lenders to register with the National Credit Regulator (NCR).

What is reckless lending?

It is unlawful for a lender to grant you credit if you don’t understand the costs, risks and obligations of the credit agreement, or if the lender does not perform a proper affordability assessment. This is classified as reckless lending.


‘Your debt could be written off, so you don’t have to pay it anymore.’


What does it mean for me?

You can have your credit agreements assessed by NDA to see if any of them amount to reckless lending. If we suspect that any of them are reckless, NDA will approach the court to have them declared as such. What this means for you, is that your debt could be written off, so you don’t have to pay it anymore.

According to the World Bank, South African consumers are the most indebted in the world, particularly when it comes to informal borrowing.

The new regulation stipulates that credit providers who fail to register won’t be allowed to retrieve money lent or credit granted.


‘The desired outcome is to locate, regulate and monitor all credit providers’


On February 4, Minister of Trade and Industry Rob Davies published the notice on the draft determination of the threshold for public comment, closing on March 16.

“The desired outcome is to locate, regulate and monitor all credit providers in the Republic, in order to promote responsible credit lending, to curb reckless credit lending and reduce the over-indebtedness of consumers,” Davies said.

Registered credit providers are now banned from partaking in unscrupulous business practices. Including unlawful practices often engaged in by informal lenders, such as retaining bank cards or IDs as collateral.

Registered credit providers will also be able to impose their right to repayment on reluctant borrowers legally through official debt collection procedures, to oppose any undue enrichment of a borrower refusing to pack back a loan.


‘10 million credit users have impaired credit records.’


Previously, only credit providers with 100 or more debtors on the books were required to register with the NCR.

The threshold will compel more companies to comply with the NCR, although we are a long way off from eradicating reckless lending altogether.

South African salaries cannot keep up with inflation. Many consumers are facing retrenchment and the over-indebted often borrow recklessly as a last resort.

President of the Debt Counsellors Association of SA (DCASA) Paul Slot said there are currently around 10 million credit users who have impaired credit records.

“This means that 10 million South Africans are struggling with debt. In 80% of the cases, they apply for more debt to repay loans.” Slot said.


‘Credit providers are required to ensure you can afford to repay the credit’


What is all the fuss about?

Reckless lending is widespread in South Africa, with big banks and retailers featuring in the news daily for exploiting their customers. When credit providers conduct affordability assessments, they are legally required to ensure you can afford to repay the credit they grant you.

Not only that, they must also make sure you have enough of your salary left over for basic monthly living expenses. If you become over-indebted as a result of taking out credit, the credit provider is guilty of reckless lending.


Do I need to do anything?

We will need you to provide us with all of the information relating to the credit agreements you want us to investigate, a copy of your ID and a few payslips. So you can get these ready if you like, while you are waiting for our call. Or simply give us a call yourself if you prefer!


Where do I start?

Simply send us your details via the online contact form on our website and one of our expert consultants will give you a phone call to guide you through the rest of the process.

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