Dodgy credit is not your skuld

You could be a victim of reckless lending by creditors.

There was a time when credit providers could do as they please when it came to granting loans to consumers, whether they could afford it or not.

But not anymore.

Government started noticing that consumers were being granted loans with astronomical repayment rates and terms, which consumers clearly could not afford.

In 2005, the National Credit Act (NCA) was implemented to stop this conduct by credit providers.

In 2013, amendments were made to the NCA and affordability guidelines were provided in the regulations for credit providers to be used when assessing a credit application.

So when is a loan deemed “reckless”?

• When a credit provider does not conduct an affordability assessment before entering into a credit agreement with a consumer, irrespective of what the outcome would have been.

• An affordability assessment should include a copy of your credit report at the time you applied for credit. If the creditor did not check your credit report before giving you credit, this is an indication of reckless lending.

• If you had an adverse listing and/or had a judgment against your name and were still given more credit, this could be seen as reckless lending.

• If your creditors cannot produce a copy of the affordability assessment that they were supposed to have done before granting you credit, you could approach the courts to declare that the credit agreement has been granted recklessly.

• When a consumer does not understand and acknowledge the risks, costs or obligations of the credit agreement.

• When a consumer becomes over-indebted as a result of entering into a credit agreement, i.e. if you sign for a loan/credit and it means that because of the repayment you don’t have money left for your living expenses, then you are over-indebted and the credit agreement would be deemed reckless.

What can happen to such an agreement if found to be reckless?

According to attorney Rynhardt de Lange if the court makes a finding that an agreement is indeed reckless, it may set aside some or all the consumer’s obligations in respect of the loan.

The court can further suspend payment of the loan for a period of time and restructure the payment plan on the loan if the consumer is found to be over-indebted.

De Lange points out that there have been agreements successfully written off by the courts.

“In 2015, Judge Louw in the matter of Absa Bank Limited v De Beer and Others (26749/2011) handed down a remarkable judgment in which the court found that Absa Bank granted a mortgage loan recklessly and that Absa has failed to comply with the NCA and the consumer’s obligation in respect of the mortgage agreement was set aside.

“This judgment was seen as a victory for consumers. That being said, it is of utmost importance that consumers be truthful when they apply for credit.”

If you were dishonest when you applied for credit, it will be extremely difficult to prove that you were a victim of reckless lending, even if you really are one.

If (on your application for credit) you gave a higher income, or a lower expenditure or reflection of your debt repayments and you were granted credit on the figures you provided, then that agreement cannot be considered as reckless credit.

If a court finds that a credit agreement is reckless, it can “set aside” a part or even all of your obligations towards that loan/agreement.

This could see you not making any further payments on that agreement.

The court may also suspend the agreement. This means you would not have to repay the loan for the duration of that suspension.

De Lange advises that if you suspect that a loan has been granted recklessly, you have options.

“You may refer the matter to court, however you will need to take costs into consideration.

“Should you not be successful, you may end up paying the credit provider’s legal fee as well.

“If you are struggling to pay your monthly debt instalments, you may be over-indebted and consulting a registered debt counsellor should be your next move.

“A good debt counsellor will do a thorough investigation of your accounts to establish reckless lending.”

Only a court or the National Consumer Tribunal (NCT) has the power to declare a credit agreement “reckless”.

If you 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.

April is Financial Literacy Month, yet sadly this does not mean much to ordinary South African consumers, as many remain in the dark with regards to their rights when it comes to their debt.

On 27 April we celebrate Freedom Day.

Sadly, only an extremely small percentage of our population can claim to be financially free.

There is lots of work to be done!

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