What is Reckless Lending?
1. What is it?
Many consumers are unaware that there are numerous reckless lending cases in South Africa. This is why it is important to know your rights as a consumer, and understand the rules set out by the National Credit Act (NCA) before taking out credit offered to you by credit providers. According to the NCA, reckless lending is when a credit provider does not conduct an affordability assessment before entering into a credit agreement with a consumer.
If a consumer does not understand and acknowledge the risks, costs or obligations, this is also considered reckless lending.
Lastly, if a consumer becomes over-indebted as a result of entering into a credit agreement this, too, is classified as reckless lending.
2. When is an agreement considered reckless?
Credit providers have a huge amount of responsibility to the consumer. This includes abiding by the rules and regulations stipulated in the National Credit Act. These guidelines have been set out to ensure that credit agreements are fair when they are processing a credit agreement. An agreement between the credit provider and the consumer is also deemed as reckless when the credit provider did not conduct an affordability assessment, to understand whether or not the consumer is able to afford the repayments on the credit account.
If consumers don’t understand the risks, costs or obligations of the credit agreement, it could also be labelled as reckless. It is the credit providers responsibility to make consumers understand what exactly they are agreeing to.
If the consumer is granted the credit and this results in over-indebtedness, this is also regarded as reckless.
3. How do I identify reckless lending?
If you took out credit after 2007 and fell into arrears, you may have fallen victim to reckless lending. Credit providers are legally required to perform affordability assessments to ensure that you can afford to make repayments on your debt.
If you fall into arrears even though your financial circumstances have not changed, your credit providers could be at fault. This means you could have the court declare that the credit agreement was a case of reckless lending. Consequently, you could have the debt written off, which means that you would not have to pay it.
4. How can NDA help me?
National Debt Advisors (NDA) offers free credit checks, whereby we assess all of your credit agreements to see whether any of them can be classified as reckless lending. If we suspect that any of your accounts are reckless, we will approach the court or tribunal on your behalf to have the agreement declared as reckless and the debt written off.
5. Where can I get more information?
You can send us your details via the contact form and a consultant will call you back to answer all of your questions. We will assist you, should you suspect that you or someone you know has experienced reckless lending.
Read about cases of reckless lending, to get clued-up and avoid becoming a victim.
