What is reckless lending?

 Reckless lending is a significant issue that affects many consumers in South Africa. It is crucial for individuals to be aware of their rights as consumers and to have a good understanding of the regulations set forth by the National Credit Act (NCA) before entering into any credit agreements with credit providers.

According to the NCA, reckless lending occurs when a credit provider fails to conduct an affordability assessment before entering into a credit agreement with a consumer. This means that the credit provider does not properly evaluate whether the consumer will be able to afford the repayments on the credit account. Additionally, if a consumer does not comprehend the risks, costs, or obligations associated with the credit agreement, or if they become over-indebted as a result of the agreement, it is also considered reckless lending.

Credit providers carry a substantial responsibility towards consumers and must adhere to the regulations of the National Credit Act. They should ensure that credit agreements are fair and should conduct affordability assessments to determine whether consumers can afford the repayments. If a credit provider fails to conduct this assessment or if a consumer does not understand the risks and obligations associated with the credit agreement, the agreement may be deemed as reckless lending.

Consumers who took out credit after 2007 and subsequently fell into arrears may have been impacted by reckless lending. Credit providers are obligated to perform affordability assessments to verify that consumers can afford their debt repayments. If a consumer falls into arrears despite unchanged financial circumstances, the credit provider may be at fault, and the consumer could potentially have the credit agreement declared as a case of reckless lending. This could lead to the possibility of having the debt written off.

It is important for consumers to be vigilant and to understand the implications of the credit agreements they enter into. By being informed about reckless lending and understanding their rights, consumers can protect themselves from potential financial hardships caused by irresponsible lending practices.

Remember, as a consumer, you have rights, and it's crucial to be knowledgeable about them to make informed decisions when it comes to credit agreements.

​​If you have any questions about debt you currently have, please feel free to reach out to a member of the Libertine Consultants team. We are here to provide you with judgement-free support and advice.

Need advice? We can assist with that too! Submit your inquiry to us via email advisors@libertineconsultants.co.za and we will provide you with sound insights on the best way forward. In the meantime, keep an eye on our YouTube channel to get more practical advice on managing the financial stress of the pandemic.