What is the Defence of reckless credit lending?

Published by The National Debt Review Center on

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.

Book with The National Debt Review Center

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

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The National Debt Review Center

The National Debt Review Center

Welcome to The National Debt Review Center, where financial stability and integrity are our guiding principles. We strive to deliver the utmost best in customer service & act with the highest standards of integrity. We are South Africa's best Debt Counselling & Debt Review Removal Company. NCR Registration Number - NCRDC3106

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