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Reckless Credit
The Benefit of a Reckless Credit Investigation

When DebtSafe finds that our client’s creditors are guilty of Reckless Lending when applying for Debt Review, that debt could be written off.

Which means you won’t have to repay the loan.

Putting a Stop to Even More
Over-Indebtedness

In the fight against over-indebtedness the National Credit Act (NCA) has deemed it the responsibility of the credit provider to ensure that when credit is given, it is done in a responsible manner to avoid over-indebtedness.

So, if a creditor provides credit to a consumer and the consumer can’t afford the repayments, it could be classified as Reckless Lending.

DebtSafe Doing Our Part to Help Consumers

Reckless Credit Investigations are now part of the Debt Review process and we do a full Reckless Credit Investigation for every consumer who applies for our Debt Review program.

What DebtSafe looks for in a Reckless Credit investigation:

Whether the credit provider failed to make a proper affordability assessment according to the NCA at the time of granting the credit,

Or, if the creditor has made the affordability assessment and entered into the agreement with our client despite the fact that (a) the client did not understand or appreciate the risks regarding the costs and obligations under the agreement, or (b) knew that the agreement would lead to our client’s over-indebtedness.

A Reckless Credit Investigation is just one of the many benefits DebtSafe provides for our clients.
When a Credit Agreement Is Deemed Reckless by the Court, the Court May:
  • Set aside part or all rights and obligation of you (the consumer) and credit provider, OR
  • Suspend the force and effect of the agreement.

Remember, only a Magistrate’s/High Court can find a credit agreement reckless.

Reckless Lending vs Reckless Borrowing
Reckless Lending

If a credit agreement or loan is found to be reckless by the Magistrate’s / High Court, the credit agreement or loan could be written of­f and the consumer does not have to repay the loan.

Reckless Borrowing

If the credit provider proves that the consumer was in any way dishonest or not completely truthful about his/her ‑financial position during the credit application process, the Court will not assist the consumer.

To find out more about the other benefits our Debt Review program offers you can request your free, no obligation, debt assessment today by filling in our call back form.
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“Being under debt review, especially with DebtSafe, is the best decision I've made. My life is less stressful. Thank you.”

Wendy S. – Port Elizabeth

Reckless Credit: Two Sides of the Same Coin

Loans, clothing accounts, expensive furniture buys and credit upon credit. The South African consumer’s debt struggle is heart-wrenching and unfortunately very real. Then there is also reckless credit to worry about.

According to the National Credit Act (that aims to be fair and non-discriminatory), all consumers have the right to apply for credit (section 60). Be that as it may, credit providers and consumers have to do everything within their power to avoid debt escalating as a result of reckless lending OR borrowing.

The National Credit Regulator (NCR) indicates that the total outstanding consumer credit in South Africa was R1.73 trillion at the end of September 2017. And, credit bureaus held records for 25.08 million credit-active consumers where 9.87 million consumers reflected impaired records.

Reckless credit can be described as two sides of the same coin – for one, creditors may be responsible for ‘reckless lending’. They, therefore, need to take caution, using their discretion when approving credit. And, secondly, consumers should not be counted out when it comes to ‘reckless borrowing’. Consumers are in control of their own finances and have to take responsibility when applying for credit.

The following sides of the reckless credit coin should be taken into account:

Creditors

  • Credit providers should not deliberately or negligently enter into an agreement with a consumer knowing that it could cause or aggravate over-indebtedness.
  • Credit providers are protected by the National Credit Act if they followed the necessary steps to determine if a consumer is eligible for credit (like a loan).
  • Credit providers’ credit policies differ and each provider should make sure that careful discretion is used when granting credit to a consumer during their protocol.

Consumers

  • Consumers have to be sure when applying for credit that they can really afford it. They can do the necessary research beforehand and shop around for better prices.
  • Consumers should not think that they are always in the clear when it comes to reckless credit – they need to disclose all the info needed for the credit providers to make proper affordability assessments.
  • For those consumers that will apply for Debt Review – as of the 1st of April 2018, the National Credit Regulator (NCR) requires that each credit agreement (included in the process) should be investigated for reckless credit. The aim hereof is to avoid debt spiralling out of control.

Regarding the above, it is therefore evident and of utmost importance that consumers (borrowers/spenders) and creditors (lenders) take caution to avoid reckless credit dilemmas.

If credit has gotten you into serious debt trouble let us know, we’ll take a look and see if we can help sort it out. Click below to contact us today.

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