What is Reckless Lending?

Anyone applying for a loan or trying to enter into a credit agreement in South Africa is vulnerable to potential Reckless Lending, at the hands of one or more creditor. At Debtco Group, we take Reckless Lending very seriously, as already struggling consumers can find their finances taking a dramatic turn for the worse when a loan or financial assistance is granted without proper consideration.

More and more struggling consumers are turning to financial institutions for help, when loans can provide relief from difficult financial situations that they face. There are specific rules set out by the National Credit Act (NCA) of 2005 that need to be adhered to, before credit applications should be approved. These rules are in place to protect you as the consumer, and it is the responsibility of each creditor and financial institution to follow them properly. Should we find that you have acquired your debts through Reckless Lending, there are legal steps that can be taken, which will only serve to benefit you. Some indicators of a reckless account could be:

• An affordability assessment was not performed by the credit provider
• The credit provider did not first run a credit check on you
• You as the consumer did not fully understand the risks involved
• The terms and conditions of the credit agreement were not properly outlined
• The loan is the cause of you becoming over-indebted
• The creditor did not first assess your financial means, obligations and prospects
• Your debt repayment history was not assessed

There are certain credit agreements which cannot be considered for Reckless Lending and are excluded, such as emergency loans, student/school loans, pawn transactions, public interest credit agreements and credit agreements where you as the consumer did not provide true and accurate information to the lender. Any credit agreements entered into before June 2007 will also not apply.

If you do acquire credit recklessly, you could find your monthly financial obligations becoming too much to handle, and can quickly fall behind on paying back what you owe. Managing your budget according to your monthly income and living expenses are is the best way to avoid becoming over-indebted, where you compromise your credit score, could become blacklisted and might even have your assets repossessed. As experts in Debt Counselling, we at Debtco Group provide a Debt Counselling service that includes investing our client’s creditors and accounts for possible incidents of Reckless Lending.

It’s important to note that if you have acquired debt by way of Reckless Lending, you are not to blame. Many creditors take shortcuts and become negligent when offering loans to clients, which can in turn lead to terrible consequences for borrowers, directly resulting from Reckless Lending. Responsible lending practices should always be followed, and if you do not get approved for credit, there are ways to work on and improve your credit score. Find out how Debtco Group can assist you with professional and customized debt solutions.