If the consumer does not understand the risks, costs, and obligations created by the proposed credit agreement, such a credit agreement is considered reckless lending.  If the credit provider conducts an assessment and concludes 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.

Credit providers have a statutory obligation to actively prevent reckless credit in terms of Section 48A and 81 (3) of the Act.

Consumers are required to answer truthfully for information that creditors put to them. Creditors on the other hand are experts at financial matters and they use very sophisticated computer programs to figure out what the consumer can and cannot afford so they must be certain about the consumer’s financial status before they offer credit.

The consumer didn’t get a quotation of what the credit will cost them. The consumer did not understand the documents shown about the credit. The consumer cannot read the language of the documents about the credit. The credit provider knew the consumer couldn’t afford to repay the credit and still offers the consumer credit.

How does reckless lending determination assist an over-indebted consumer? Section 81(3) of the National Credit Act prohibits a credit provider from entering into a reckless credit agreement with a prospective consumer. Where a reckless credit agreement is concluded, a court may declare that the credit agreement is reckless (Section 83(1)).  If a court declares that a credit agreement is reckless, the court may make an order –

1. Setting aside all or part of the consumer’s rights and obligations under that agreement, as the court determines just and reasonable in the circumstances; or
2. Suspending the force and effect of that credit agreement until a date determined by the Court when making the order of suspension (Section 83(2)).

Our specialist attorneys will approach the courts on your behalf.  If reckless lending has been identified, it can assist over-indebted consumers that is why it is necessary to identify reckless lending. It is necessary to identify reckless lending as it is in line with the purposes of the Act.

What information do you require to determine whether there is a case to be made out for reckless lending?

We require the following information:

1. The date the credit agreement was finalized or entered into;
2. A copy of the credit agreement;
3. A copy of the pre-agreement statement and quotation;
4. Details concerning your financial means, prospects, and obligations as they existed at the time the credit was granted; and
5. The credit assessment was conducted by the credit provider at the time.

Section 170 of the National Credit Act read with Regulation 56 obliges a credit provider to keep records of all applications for credit, credit agreements, and credit accounts for a period of 3 years from the date of termination of the credit agreement.

If you suspect that credit may have been granted to you recklessly, it is well within your rights to approach us so that we can do an investigation. However, you are struggling to service your debt for one reason or another it does not mean that credit was given to you recklessly. We will need to investigate and get the documentary evidence as listed above to prove reckless lending. Credit providers on the other do not normally take allegations of reckless lending lying down.

If you are certain that credit was advanced to you and at the time you did not qualify for the credit, let us call you back with more information on the subject of reckless lending by completing the call-back request to your right.