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A man counting the money he received from reckless lending

What is Reckless Lending?

Unfortunately, it is not always possible for people to save up and buy goods for cash. Most people rely on credit to buy expensive, necessary things, like a car or a house and in some cases university fees. Despite the implementation of the National Credit Act (NCA), which effectively prohibits credit providers from granting credit to consumers who cannot afford it, there are still a large number of reckless lending cases in South Africa, which often go unnoticed. 

The National Credit Act (NCA)

In simple terms, Section 80 of the NCA states that a credit agreement will be considered to be reckless if the credit provider:

  • Failed to conduct an affordability assessment before entering into the agreement with the consumer. The credit provider must do a credit check.
  • After conducting the assessment, the credit provider entered into the agreement, despite the fact the credit agreement would render the consumer over-indebted.
  • The consumer did not understand and acknowledge the risks and costs for obligations of the credit agreement.

A consumer is considered to be “over-indebted” if he/she is unable to meet their financial responsibilities or pay their creditors in a timely manner, in terms of their credit agreements. 

A credit agreement can only be deemed reckless if there was no dishonesty by the consumer in their credit application, specifically with regards to the declaration of their income and expenditure.

What Are The Consequences of Reckless Lending?

Section 80(3) of the NCA strictly prohibits a creditor from entering into a reckless credit agreement with a consumer. The act states that if a reckless credit agreement is entered into, a court may declare the agreement as reckless. If a court declares a credit agreement reckless, the court may: 

  • Set aside all or part of the consumer’s rights and obligations under the agreement, or
  • Suspend the force and effect of the credit agreement until a date determined by the court.

Should a credit provider conduct an eligibility test and conclude that entering into the proposed credit agreement would cause the potential consumer to become over-indebted, but still enters into the credit agreement with the consumer, the credit agreement will be classified as reckless.

How Can Debt Movement Help?

Bad debt often happens to good people, if you are struggling to pay your monthly repayments, you could be over-indebted and may even qualify for Debt Review.

As part of the Debt Review process, our team at Debt Movement does an in depth credit check on your behalf, to determine if any credit agreements could be classified as reckless. If we suspect any reckless lending there is a possibility that the debt can be written off.

Our goal is to help you in your journey to financial freedom by reducing your monthly instalments and interest rates by up to 50% and legally protecting you and your assets from debt collector harassment and repossession. We are here to empower you to take control of your debt, and find financial freedom through our process of providing professional debt advice and solutions. Please feel free to contact us.