In this article, we will explain what reckless credit is and we will also discuss why there is an interest in reckless credit at the moment.
There are two reasons for the interest: the first is due to the fact that there has just been a change to the National Credit Act which makes reckless credit investigation compulsory for everyone that applies for debt review.
The second reason is that one of South Africa’s banks has had loans written off in the National Consumer Tribunal for Reckless Credit.
Why was the law changed and how will that affect the average guy who has a few loans and a credit card?
This has been a huge debate in the industry since the National Credit Act started.
There have been a number of landmark cases in the past. A guy in Hartebeespoort got a massive building loan written off, because the loan made him overindebted and as a result the court said it was a resckless credit and wrote the whole loan off.
But a great number of cases have gone undetected. In many cases, the banks will offer a settlement if it looks like it might be reckless, and in other cases, they know the person fighting them is very often not in a strong financial position and will struggle to afford legal fees if the fight goes to court.
Now that the law has changed, a debt counsellor must investigate in every case, and if reckless credit is suspected, refer the matter to the National Credit Regulator.
In another example, a debt counsellor suspected reckless credit and did an investigation. The numbers such as income versus debt and expenses and the fact that he couldn’t get any assessments from the bank told him something was wrong, so he reported to the National Credit Regulator.
They did an investigation and spoke to the bank and found no reckless credit. But the Debt Counsellor was convinced he was right, so when the National Credit Regulator rejected the reckeless credit application, he decided to take the case to the National Consumer Tribunal. Here they held a hearing very similar to a court hearing, and they found that 3 of the 4 agreements were reckless, and wrote off all the money, interest and charges.
One of the main reasons here was that the bank didn’t do affordability assessments or keep a record which proved this guy could afford the installments every month.
This all sounds great and there definitely will be advantages for everyone, because the lenders will be more careful before they give money to people who can’t afford it.
But there is another part of the law which everyone has to be very careful of. When you apply for credit you need to make sure that you have told the truth about all your other expenses and all your other income, because if you have lied about any of that, you make your reckless credit case very weak. The bank does have to check what you supply them, but if the information you gave them affects their decision, you will lose in court. Always tell the truth about other income and don’t hide the expenses you pay in cash.
Make sure that you can afford a loan before you apply for one. And make sure the figures you give the bank are correct. If you need to hide away some of your expenses to get a loan, then you definitely can’t afford the loan, and maybe you should be looking at getting some help to get your debt fixed.
If you need debt counselling, contact RD Debt Counselling today.