What is the Defence of reckless credit lending?

Published by The National Debt Review Center on April 14, 2024April 14, 2024

The defence of reckless credit is a provision under the National Credit Act 34 of 2005 (as amended) (the Act) in South Africa. This Act promotes responsible credit granting and prohibits reckless credit granting.

Reckless credit occurs when a credit provider fails to conduct an assessment or enters into a credit agreement with a consumer despite the fact that the preponderance of information available to the credit provider indicated that the consumer did not understand or appreciate the risks, costs or obligations under the proposed credit agreement or entering into that credit agreement would make the consumer over-indebted.

The Act provides a credit provider with a complete defence to an allegation of reckless credit. The defence is set out in section 81(4) of the NCA and states that, if a consumer failed to fully and truthfully answer any requests for information made by a credit provider, then this is a complete defense to an allegation of reckless credit.

Depending on the circumstances, a consumer may either raise reckless credit as a defence or make application to court or to the National Consumer Tribunal (the tribunal) to have a credit agreement declared reckless.

In summary, the defence of reckless credit is a legal provision that protects credit providers from allegations of reckless credit granting, provided they have taken reasonable steps to assess the consumer’s understanding and financial capacity before granting credit.

Example:

Imagine you applied for a loan but forgot to mention a large upcoming expense. If the lender approved the loan anyway, and you struggled to repay due to this expense, they might argue that your non-disclosure was reckless lending on their part. However, if they could show the expense wouldn’t have significantly impacted your affordability, the defence might not hold.

Learn More about Reckless Lending

At NDRC, we have experienced debt counsellors who can help you understand your rights and explore solutions if you’re facing a potentially reckless credit agreement. We offer free, confidential consultations where you can discuss your situation and explore options like debt review, which can help you manage your overall debt and become debt-free faster.

Table of Contents

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If you’re unsure about your credit agreements or suspect recklessness, don’t hesitate to contact NDRC. You can book a free consultation with one of our debt counsellors by clicking the booking button below or calling us at 0410125036

APPLY FOR DEBT COUNSELLING ONLINE BELOW

Application by Consumer for Debt Review (FORM 16)

In terms of section 86(1) of the National Credit Act No. 34 of 2005

Step 1 of 5

Applicant details: If you are married in community of property, both spouses must apply jointly.
Main (1st) Applicant
Title*
Initials*
Identity Number*
Full Names & Surname*
Gender*
Ethnic Group*
Marital Status*
Mobile Number*
Email Address*
Address*
Province*
Postal Code*
Owner/Tenant:*
Period at Address:*
Number of dependents
Age of dependants
Separate by commas
Next of Kin Full Names*
Next of Kin Contact Number*
Next of Kin Email Address*
2nd Applicant (SPOUSE)
Title*
Initials*
Identity Number*
Full Names & Surname*
Gender*
Ethnic Group*
Marital Status*
Mobile Number*
Email Address*
Address*
Province*
Postal Code*

Declaration*
I declare as follows
1. I undertake to comply with all requests from the debt counsellor to assist him/her to evaluate my state of indebtedness and to investigate the prospects for responsible debt restructuring. I consent to The National Debt Review Center obtaining my credit record from any/all registered credit bureaus and any other registers which may contain any of my credit information.
2. I undertake not to enter into any further credit agreements other than a consolidation agreement, with any credit provider until one of the following events have occurred: The Debt Counsellor rejects my application; or The Court determines that I am not over-indebted; or All my obligations under credit agreements as re-arranged are fulfilled.
3. I understand that I MUST NOT SIGN ANY DOCUMENTS whatsoever that I receive from any credit provider and shall make no promises, either verbally or in writing, to any of my credit providers.
4. I undertake not to hand over any of my assets to debt collectors unless I have first discussed the matter with The National Debt Review Center.
5. I confirm that the information contained in this document is to the best of my knowledge true and correct.
6. I declare that the debt review process has been explained to me and I understand that:
  - The debt remains my responsibility and that I must continue making payments to all my credit providers every month notwithstanding the fact that I have applied for debt review. Accounts from service providers and accounts in which legal action has commenced cannot form part of the debt review process and that I am personally responsible for paying them.
  - I must open a new banking account (savings) and I must arrange for my salary to be paid into the new account. I understand that if I fail to do so, the banks may deduct monies from my account and The National Debt Review Center will not be able to assist in obtaining a refund of monies taken.
  - I must provide proof of insurance on motor vehicle(s).
  - The initial repayment amount calculated by The National Debt Review Center. may not be sufficient for my credit providers and they may request a higher amount. The National Debt Review Center. may, therefore, contact me with a request for an increase in the repayment amount.
  - I understand and accept the Debt Counselling Fee Structure and understand that my first installment of the debt re-arrangement plan (or part thereof) will be payable to The National Debt Review Center. for services rendered.
  - I understand my debt review application must be finalized with a court order and I authorize The National Debt Review Center.to instruct an attorney to appear in court on my behalf and I accept full responsibility for the settlement of the legal fees as set out below.
  - I understand that if I default on any obligation in terms of the debt re-arrangement plan agreed upon with credit providers, such credit providers may terminate the debt review process and then enforce, by litigation or other judicial processes, any right or security they may have under my credit agreements. I also understand that The National Debt Review Center. may withdraw from my debt review in the event that I default on payments or fail to comply with any reasonable requests. I understand that I will then be required to pay the original installments and interest rates; reduced installments and interest rates will be canceled and credit providers can then proceed with legal action against me that may result in judgment being taken and repossession of my assets.
7. I understand that a clearance certificate will only be issued after The National Debt Review Center. is satisfied that I have fulfilled all debt obligations under debt review.
8. I understand that there is a duty on me to inform The National Debt Review Center. of any changes in my residential address, telephone numbers, employer and income.
9. I indemnify all employees and nominees of The National Debt Review Center. against any claim that may be instituted against it or them arising from any act or omission by such person appointed by The National Debt Review Center. or its nominee in the lawful execution of the terms and conditions of this agreement entered into by myself, and confirm that The National Debt Review Center. shall not be liable for any damages suffered by me resulting from any act or omission of whatsoever nature, however arising. I hereby acknowledge that all lawful actions taken by The National Debt Review Center.under its powers under this agreement are tacitly ratified by me, and I will be bound by such agreements as principal debtor.
10. I/We the Consumer(s) authorise my/our debt counsellor and it’s staff and/or agents to
  process, store and keep my/our personal information that has bearing to my/our debt review
  and whilst I/we do explicitly give my/our consent to our debt counsellor to do so, I/we
  understand and accept that my/our debt counsellor is obliged to act within the parameters
  of the Protection of Personal information Act (“POPI”).
Debt Counselling Fee Structure

All fees are regulated by the National Credit Regulator (NCR). We subscribe to the fee guidelines as prescribed by the NCR. Fees payable are as follows (all amounts and percentages quoted exclude VAT):
1. An Application Fee of R50.00 & Administration Fee of R300 per debt counselling consultation.
2. A Restructuring Fee of an amount equivalent to the first installment of the debt re-arrangement plan to a maximum amount of R8,000 (excl VAT) per single application. Should you wish to withdraw from the debt review process, there will be a cancellation fee as set out in the NCR guidelines payable by you.
3. A Restructuring Fee of an amount equivalent to the first installment of the debt re-arrangement plan to a maximum amount of R9,000 (excl VAT) per joint application. Should you wish to withdraw from the debt review process, there will be a cancellation fee as set out in the NCR fee guidelines payable by you.
4. A monthly Aftercare Fee of 5% (excl VAT) of the monthly installment of the debt re-arrangement plan up to a maximum of R450 (excl VAT) payable in every month after month 2 in which aftercare services are rendered.
5. To the Payment Distribution Agency (PDA): A monthly Payment Distribution Fee for each amount distributed in respect of each credit agreement included in the consumer’s debt re-arrangement plan.
6. To Attorneys firm: A legal fee of an amount equivalent to the first installment to a maximum of R8,000 (excl VAT) per single application and R9 000 (excl VAT) per joint application to start the process to obtain a court order forcing your credit providers to abide by the terms of the debt re-arrangement plan. The deposit is payable in the 2nd month of the application.
Signed at(Place):*
Date*
MM slash DD slash YYYY
Name of Main Applicant:*
Signature of Main Applicant:*
Name of 2nd Applicant:
Signature of 2nd Applicant:
TERMS AND CONDITIONS The Consumer agrees that the terms and conditions hereunder shall apply.
1. The terms and conditions as set out hereunder are governed by the National Credit Act and Regulations (the “NCA) and National Credit Regulator (NCR). The NCR has the authority to issue NCR Guidelines which can be amended from time to time. The Consumer indemnifies the Debt Counsellor (its directors, shareholders, employees and consultants) against any damages of whatsoever nature and howsoever arising from changes in the said NCA or NCR Guidelines from time to time.
1. This debt review application is in terms of the NCA and the Debt Counsellor is fulfilling the statuary duty as an unbiased party between the consumer and the credit providers;
1. The Debt Counsellor is entitled to suspend the debt counselling services, as per the prescribed form set out in the NCR Withdrawal Guidelines, if the Consumer fails to:3.1. Comply with the reasonable requests of the Debt Counsellor;3.2. Pay the prescribed fees in terms of the NCR Debt Counselling Fee Guidelines.
2. Upon the suspension of debt counselling services by the Debt Counsellor pursuant to the provisions of clause 3 the Consumer hereby acknowledges that he/she understands that4.1. There is a risk of credit providers terminating the debt counselling process;4.2. He/she may not incur further debt; 4.3. He/she cannot withdraw from the debt counselling process after a Form 17.2 (declaration of over-indebtedness) has been issued; 4.4. Transferring to an alternative debt counsellor is subject to the payment of all outstanding fees of the current Debt Counsellor.
3. In the event of the debt counselling services being suspended by the Debt Counsellor in terms of paragraph 3, the consumer hereby indemnifies and holds the Debt Counsellor (its directors, shareholders, employees and consultants) harmless against:5.1. Termination by credit providers; 5.2. All claims, losses, costs and expenses incurred or suffered by the Consumer arising from any claim/s instituted by any third party in relation to or in connection with the debt counselling process.
4. A consumer cannot withdraw from the Debt Counselling process after the Form 16 (application form) has been signed. The debt counsellor can only reject the application should it be found that the consumer is NOT over-indebted. Proof thereof will have to be submitted to the NCR in order to clear the debt counselling listing from the consumer’s credit profile as set out in NCR Withdrawal Guideline.
5. The debt counsellor is obligated to refer the debt re-arrangement proposal to a Magistrate’s Court or to the Tribunal for a court order subject to payment of legal fees.
6. A court order can be rescinded if the consumer is no longer over-indebted or if all debts have been settled in full and the Debt Counsellor has issued a clearance certificate. An estimate of costs will be provided to the consumer by the Debt Counsellor upon request of a rescission application.
By signing this declaration the consumer confirms that he/she understands the implications and consequences of debt review.
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Understand Reckless Lending in South Africa.
The National Debt Review Center

What is the Defence of reckless credit lending?

Book with The National Debt Review Center

APPLY FOR DEBT COUNSELLING ONLINE BELOW

Application by Consumer for Debt Review (FORM 16)

Step 1 of 5

Applicant details: If you are married in community of property, both spouses must apply jointly.

Main (1st) Applicant

2nd Applicant (SPOUSE)

EMPLOYMENT DETAILS

Main (1st) Applicant

2nd Applicant (SPOUSE)

HOUSEHOLD LIVING EXPENSES

DEBT OBLIGATIONS

The National Debt Review Center

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Get Your Free Debt Review Quote in Under 2 Minutes!

What are the qualifications of a debt counsellor?

How do I find a debt counsellor?

What is the Defence of reckless credit lending?

Book with The National Debt Review Center

APPLY FOR DEBT COUNSELLING ONLINE BELOW

Application by Consumer for Debt Review (FORM 16)

Step 1 of 5

Applicant details: If you are married in community of property, both spouses must apply jointly.

Main (1st) Applicant

2nd Applicant (SPOUSE)

EMPLOYMENT DETAILS

Main (1st) Applicant

2nd Applicant (SPOUSE)

HOUSEHOLD LIVING EXPENSES

DEBT OBLIGATIONS

The National Debt Review Center

0 Comments

Leave a Reply Cancel reply

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Get Your Free Debt Review Quote in Under 2 Minutes!

What are the qualifications of a debt counsellor?

How do I find a debt counsellor?