Reckless lending is a huge issue in South Africa, taking money away from those who cannot afford to lose it, this has been happening for years. Hurting those who cannot afford to seek out help and correct their finances, many of whom don’t understand the implications of debt, reckless lending is now a hot topic of the debt world, leading to sticky situations for many credit providers. So what exactly is it? If you took out multiple loans – are they reckless?
What is a reckless loan?
If a credit provider does not fully and effectively conduct an affordability assessment before granting credit to a consumer, or if the assessment find that the consumer cannot afford credit and it is still granted, the National Credit Act considers this to be reckless lending.
In addition to this, if the provider enters into a credit agreement with someone who does not fully understand the implications of the agreement and its costs, this can also be considered reckless as it is taking advantage of the consumer.
Lastly, if the consumer becomes over indebted as a direct result of the new credit agreement, this can also be seen as reckless.
How to identify and deal with reckless lending?
If you took out credit after 2007, as that is when the NCA was amended, and fell into arrears as a result of too much debt, you could be a victim of reckless lending. This unaffordability of the taken credit could mean that a proper assessment of your financial situation wasn’t done, leaving you unable to make payments month after month.
If you fall into arrears without a change in financial situation or circumstance, it could be your credit provider that is at fault. A term that is not commonly known by many, reckless lending in this way has severe consequences for the credit provider. In this situation your could have the debt written off, taking the matter to court to declare the credit reckless would mean that you no longer have to pay back the debt.