With a host of lengthy information available, we seek to simplify the world of debt – so what is the law on reckless lending?
Within the National Credit Act 34 of 2005, the law states that before to entering into any sort of credit agreement with a consumer, the creditor must conduct a detailed financial assessment on behalf of the client – ensuring any lending would not be reckless.
If you have taken out a loan, a credit card, a bond or vehicle finance after 2007 and have fallen behind or are currently in arrears, you may be a victim of reckless lending. The banks have an obligation to perform suitability or eligibility tests in order to assess whether or not you can responsibly make the regular payments.
If the credit provider fails to conduct the assessment properly, any credit agreement entered into is classified as reckless lending or reckless credit, irrespective of what the outcome of the assessment might have been. Should the credit provider conduct an assessment and decide that the consumer does not understand the risks, costs and obligations created by the proposed credit agreement, but still enters into the credit agreement with the consumer, the credit agreement is seen as reckless lending and may be thrown out.
If the credit provider does conduct an assessment and decides that entering into the credit agreement would cause the consumer to become over-indebted, but still enters into the credit agreement, the credit agreement is classified as reckless.
If your circumstance have not changed and you are now in arrears this may mean that the bank may not have done its job – a clear indication that the debt may be reckless and could be written off.