An issue common in South Africa, it is ideal for every credit active citizen to understand this simple question – What is reckless lending?
Reckless lending is when a credit provider gives you a loan without the proper affordability assessment and process. Entering into an agreement where the debtor cannot pay back the balance in good time, the credit provider could be at fault as they must ensure the debtor has the income to support their loans – not pushing the consumer into over-indebtedness. Alternatively if the consumer does not fully understand the agreement before entering into it, whether fault of creditor or debtor, then this could be seen as reckless lending as the details were not fully explained.
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, conclude that the consumer does not understand the risks, costs and obligations created by the proposed, or 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.
When a credit provider lends you money without conducting a proper affordability assessment to ensure that you can afford to repay your credit and continue to live comfortably off of what you earn, then they are guilty of reckless lending.
Additionally, if a credit provider conducts an assessment and lends money to you, despite knowing that you are unable to pay it back, without sacrificing your normal living standards, then they too have committed reckless lending.
We Help You Get Financial Redress
If you are suffering as a result of your credit provider granting you reckless credit, we are here to ensure that you get financial redress and that your credit providers answer for their wrongdoings.
We will challenge your debts, one by one, and have them set aside or written off, if we discover that reckless lending has taken place. Moreover, once we arrange for your debts to be legally written off, they will be removed from your credit profile completely, along with all other negative information listed under your name.
If your car or home has been repossessed, we will challenge your debt and, in some cases, may even get your credit providers to give you compensation for any hardships you may have suffered due to their actions. However, we don’t challenge vehicle loans or mortgages (bonds) because this may lead to your property being repossessed as part of the termination of the agreement.
Reckless Lending and The Law
Credit providers are regulated by the National Credit Regulator (NCR) to prevent reckless lending from occurring, as it leads to over-indebtedness and, in some cases, complete financial ruin.
The National Credit Act (NCA) protects consumers from reckless lending and proposes guidelines that banks should follow in order to practice responsible lending. The Act also sets out the rules and guidelines that outline how you are protected as a consumer, as well as how the credit providers should be punished for reckless lending and other illegal activities.
If you would like your credit agreements assessed for reckless lending or legal assistance to get a debt declared as reckless, another reputable company you can approach is National Debt Advisors.
So what is reckless lending? It’s the process of irresponsible lending with disastrous effects for the client.