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What you can do if you have been a victim of reckless lending

by | Feb 24, 2023 | Personal Finance

There is nothing worse than being stuck in the vicious cycle of an unending debt trap. However sometimes it may not even be your fault. The truth is many consumers fall victim to reckless lending without even knowing it. In this article we unpack the notion of reckless and how consumers can stay protected. Reckless lending refers to the practice of lending money to individuals or entities without proper regard for their ability to repay the loan. This can lead to defaults and financial losses for both the lender and the borrower and can contribute to financial instability and economic downturns. In some cases, reckless lending may be a result of a lack of regulation or oversight, or a failure to properly assess the creditworthiness of borrowers. It can also occur due to the incentive structure in financial institutions that rewards short-term gains over long-term sustainability.

According to the National Credit Act reckless lending is the provision of credit to a consumer who does not have the means to repay the loan and the creditor should have known this at the time the credit was granted. The NCA outlines the following requirements for a debt to be deemed reckless lending:

  • There was no quote provided to the consumer regarding the cost of the credit.
  • Despite being shown the credit documents, the consumer did not understand them.
  • The consumer is unable to read the credit documents.
  • Consumers were offered credit even though they were unable to repay it.

 

The NCA requires credit providers to conduct an affordability assessment to determine if the consumer can afford the credit and also to disclose the costs of the credit to the consumer before the credit agreement is entered into. The act also has provisions for the protection of consumers against reckless lending by credit providers.

In particular, Section 80 of the NCA makes it an offense for a credit provider to grant credit recklessly and Section 86 of the NCA provides that a court may cancel a credit agreement that it finds was reckless. The National Credit Regulator (NCR) is responsible for enforcing compliance with the NCA and has the power to investigate and prosecute credit providers for reckless lending.

If you believe you have been a victim of reckless lending, you can report the matter to the National Credit Regulator (NCR): The NCR is responsible for enforcing compliance with the National Credit Act (NCA) and has the power to investigate and prosecute credit providers for reckless lending. You can report the matter to the NCR by filling out a complaint form on their website or by calling their hotline.

You can also take legal action against the credit provider to have the credit agreement cancelled or to seek damages. You may want to seek the advice of a lawyer who is experienced in handling cases involving reckless lending.

If you are struggling to repay the loan due to reckless lending, you can seek debt counselling. At National Debt Advisor we can assign one of our qualified debt counsellor to help you to restructure your debt, negotiate with your creditors, and develop a debt repayment plan that is affordable for you.  If you have been a victim of reckless lending, it is likely that your credit report has been negatively affected. You can contact the credit bureau to check your credit report and report any errors or inaccuracies.

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