I really can’t cope with the rising cost of goods, especially petrol and food! It feels like we simply can’t afford to exist anymore.
Things have been really tough over the last two years, and it doesn’t look like it will be getting better anytime soon.
So whether we are taking goods “on the boekie” from the corner shop or accessing formal credit, the bottom line is, meeste mense lewe op skuld!
With formal credit, the National Credit Act prohibits creditors from giving credit to consumers who can’t afford to pay it back, but this definitely still happens.
This is referred to as reckless lending.
Reckless lending applies to a loan, credit card, home loan, vehicle finance and happens more often than you think.
Many victims are the poor and financially uneducated, yet all income levels are affected.
Credit providers (including banks) have a statutory obligation to actively prevent reckless credit/lending in terms of Section 48A and 81(3) of the National Credit Act (NCA).
Here are some questions and answers that can help you understand the concept of reckless lending better:
Q When is credit regarded as reckless lending?
A If a credit provider didn’t do a proper affordability assessment on your income and expenses to check if you can afford to repay the credit which they gave to you. That is irrespective of what the outcome of the assessment would have been. So even if you were likely to have passed the affordability assessment, if no assessment was done, or even if they only did a partial assessment, that’s regarded as reckless lending.
– If a creditor did not check your credit report when you applied for the credit.
– If you had an adverse listing and/or judgement against you and they granted you the credit.
– If the creditor didn’t disclose all the risks and costs of the credit agreement to you.
– If you become over-indebted and you were unable to pay your living expenses and debt instalments because of the new credit granted.
IMPORTANT: If you’re married in-community-of-property, you can’t enter into a credit agreement without the consent of your spouse. Credit providers must obtain a signed declaration from your spouse before granting credit to you.
If you are married out-of-community-of-property, you do not need your spouse’s consent to get credit, but credit providers can’t take your spouse’s income into account unless you take out credit jointly.
Q Who do you approach if you think you might be a victim of reckless lending?
A Only a court or the National Consumer Tribunal (NCT) has the power to declare a credit agreement “reckless”. If you are not under debt review and 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.
Q Is reckless lending a legal defence for a consumer?
A If you are a victim of reckless lending and a creditor takes legal action against you, you should give notice of your intention to defend yourself on the grounds of reckless lending.
NB: The creditor will have to produce a copy of the affordability assessment, which should include a copy of your credit report at the time of your application.
Q What can happen if a court finds that a credit agreement is reckless?
A Part or all of your debt obligations (related to the reckless lending finding) can be “set aside”. This means you may no longer be obliged to continue paying.
The court may also decide to suspend the agreement for a certain time, or amend or restructure the agreement taking the consumer’s other financial obligations into account.
Q Can you be a victim of reckless lending if you lied on your application?
A No! If you inflated your income or lessened your expenses or debt repayments and were granted a personal loan, credit card or any other kind of credit which you cannot afford, then you can’t ask for the credit agreement to be declared reckless.
Seriously, you can’t be that thick-skinned! Or as we like to say it on the Cape Flats, mens kan mossie soe dikvel wees nie!
Q What does reckless lending NOT apply to?
A Any agreements entered into before 1 June 2007, school/student loan, pawn transaction, an emergency loan, public interest credit agreement, temporary increase in credit limit and an incidental credit agreement.
In conclusion, if you are a legitimate victim of reckless lending, then you have the right to have your debt written off, suspended or amended.
But I would also like to caution people against applying for more credit when they know they can’t afford it. This is a vicious cycle.
I know times are tough but taking on more debt can and probably will eventually lead to creditors taking legal action and add even more stress to your life.
More debt may be an option, but it certainly isn’t the answer.
For more information you can contact the National Consumer Tribunal (NCT) on www.thenct.org.za, or call 010 590 5200 or email [email protected]
And finally, the response to last week’s article on prescribed debt has been overwhelming, to say the least.
I am going to do a follow-up on that next week and answer some of the questions you have asked.
Apologies, but there is just no way that I could personally respond to all the enquiries I received!
Also, watch on Facebook for my next live video.
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