What is Reckless Lending?

The law states in the National Credit Act 34 of 2005 that prior to entering into a credit agreement with a consumer, the credit provider must conduct a detailed financial assessment on behalf of the client. Should the credit provider fail to conduct such assessment, any credit agreement entered into between the credit provider and the consumer 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 conclude 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, such credit agreement is classified as reckless lending or reckless credit. Should the credit provider conduct an assessment 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, such credit agreement is classified as reckless lending practice.

Have you been a victim of Reckless Lending?

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 your affordability to make the regular payments. If your circumstance have not changed and you are now in arrears this may mean that the bank may not have done its job and a clear indication that the debt may be reckless and could be written off. In those circumstances you may be able to have your debt written off due to the fact that you might have been ineligible or unsuitable for the finance - alternatively you could have your debt written off if too much time has passed and the outstanding balance has now become prescribed debt.