As a South African consumer earning a basic salary and attempting to make important progress in your life, be it for the best interest of your family or to overcome unexpected financial setbacks, the prospect of attaining useful credit can make a big difference.
The issue does not lie in attaining the occasional and necessary loan, but rather comes into play when debt builds up and can no longer be managed – this results in consumers becoming over indebted, missing monthly payments and instalments because of financial shortcomings and then suffering the unfortunate consequences that come with it. Consumers who are not able to honour their credit agreements face the possibility of legal action taken against them, including asset repossession, which can take a huge toll on an individual and family’s wellbeing and sense of security.
Reckless Lending, as defined by the National Credit Act (NCA), occurs when a creditor allows a consumer to enter into a credit agreement without first conducting an affordability assessment. An affordability assessment outlines a person’s current finances in detail, determining whether or not they will be able to take on an additional monthly expense and pay it back in the allocated time frame.
In certain cases, the financial burden of being in deep debt can be the result of poor planning, sudden loss of income or a change in living expenses. Many consumers do not realise that reckless lending is also a (not very farfetched) possibility that could have landed them in debt, which is where Less Debt comes in. As part of our service to our clients who suspect Reckless Lending, we will place you under debt review after conducting a thorough affordability assessment. During this time, we will take into account your financial circumstances during the time that you acquired the debt that has caused you to become over indebted – this includes your foreseen income and expenses at the time, as well as your net income, credit obligations and the credit repayment plan.
Through an affordability assessment, creditors know what the applicant’s salary, monthly financial expenses and commitments, existing debts, financial means and projections indicate – the regulation of an affordability assessment is entirely for the well-being of consumers who may very well be entering into a contract without the financial means to follow through, or even a full understanding of what is expected of them. It is very important that the consumer in question understands the credit agreement and is not blindsided by crazy interest rates or unclear terms and conditions – this is why the creditor needs to explain all the risks in advance, to avoid reckless lending.
Our Less Debt financial experts provide a trustworthy and effective service to clients, where we are able to identify reckless lending and assist you from there. If you have been victim to reckless lending, we will be in the position to negotiate lower payment rates with the creditor that has come up as a reckless lender in our report – this important step gives us plenty of leverage during the negotiating stage, and can drastically reduce the monthly instalment you are expected to pay back.
A recent study, conducted near the end of 2018, points to the possibility that as much as 40% of all credit made available from 10 of South Africa’s most acclaimed providers could have been reckless lending. This is a scary statistic that is concerning to everyday consumers who put their trust in credit providers who promise transparent financial solutions. If you suspect that you have fallen victim to reckless lending or require professional assistance, check in with our reputable Less Debt team today by filling out our online contact form. All of our financial services are approved by the National Credit Regulator (NCR).