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Are you a victim of reckless lending or reckless credit lending? you could have your debt written off.

Reckless Lending

What can I do if I am suspecting reckless lending?

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What is Reckless Credit Lending in terms of The National Credit Act?

Section 80 of the National Credit Act explains reckless lending and the process to be followed;

A credit agreement is reckless if, at the time that the agreement was made, or at the time when the amount approved in terms of the agreement is increased, other than an increase in terms of section 119(4)-

(a) the credit provider failed to conduct an assessment as required by section 81(2), irrespective of what the outcome of such an assessment might have concluded at the time; or

(b) the credit provider, having conducted an assessment as required by section 81(2), entered into the credit agreement with the consumer despite the fact that the preponderance of information available to the credit provider indicated that-

(i) the consumer did not generally understand or appreciate the consumer’s risks, costs or obligations under the proposed credit agreement; or
(ii) entering into that credit agreement would make the consumer over-indebted.

This basically means that a consumer has the chance of having their obligations towards a credit agreement completely set-aside or suspended if:
A credit provider did not conduct an affordability assessment before entering into a credit agreement with a consumer, irrespective of what the outcome would have been. This includes doing a credit check.
A consumer did not understand and acknowledge the risks, costs for obligations of the credit agreement.
A consumer becomes over-indebted as a result of entering into a credit agreement.
If consumers feel that their credit provider has not complied with the criteria and regulations, they have every right to take the necessary steps to have the court / National Credit Tribunal declare that the credit had been granted recklessly.
Though according to the Act, all of the above only applies if there was no dishonesty by the consumer in their loan application, specifically with regards to the declaration of their income and expenditure.

For if they were dishonest in applying for credit, it will be extremely difficult to prove themselves a victim of reckless lending – even if they are one.
Section 81 (4) of the NCA states that the credit provider has a complete and absolute defence to an allegation that an agreement is reckless – if can be established that the consumer was dishonest with the information supplied to the credit provider, as part of the required assessment.

If you are struggling to pay your monthly debt installments, you may be over-indebted, and consulting a registered debt counsellor should be a definite option. There is no doubt that large-scale reckless lending has taken place in the past, and still continues to take place today. A good debt counsellor is able to conduct a thorough investigation into your accounts to establish whether you have been granted credit recklessly, and then take the matter further.

Only a court or the National Consumer Tribunal (NCT) has the power to declare a credit agreement “reckless”. If you don’t have a debt counsellor, you can approach the courts yourself, hire an attorney, approach legal aid, or refer the matter to the NCT.

Consumers should try and end the cycle of incurring more debt by constantly applying for loans they cannot afford, and rather look at options of consolidating their debt into one monthly lower installment, as done by the process of debt review.

How to Prove Reckless Lending?

What information do you require to determine whether there is a case to be made out for reckless lending in terms of the National Credit Act?

The first step is to apply for Debt Counselling.

The following information will be required:

The date the credit agreement was finalized or entered into;
A copy of the credit agreement;
A copy of the pre-agreement statement and quotation; 
Details concerning your financial means, prospects and obligations as they existed at the time the credit was granted; and
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 a debt counsellor so that he/she can do a proper investigation.

However, if 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 listed above to prove reckless lending. Credit providers on the other do not normally take allegations of reckless lending lying down.

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