The practice of reckless lending continues unabated, even among major credit providers. And not enough is being done to stop the unethical practices that facilitate over-indebtedness.
The National Credit Act (NCA) states that granting a loan to someone who cannot afford it is reckless lending. The Act allows the National Credit Regulator (NCR) to apply for the licence of a credit provider that engages in reckless lending to be revoked, which will put the credit provider out of business.
Lesiba Mashapa, the NCR’s company secretary, says the regulator received 291 complaints of reckless lending in 2014.
A Gauteng domestic worker and single mother of three earns R4 800 a month. She has debt of R21 600 and her credit record shows that she has defaulted on two accounts. Nevertheless, Cash Converters this month granted her a loan of R500.
In December, the regulator took action against Cash Converters for alleged breaches of the Act, including failing to conduct proper affordability assessments when granting loans. The case will be heard by the tribunal later this month.
Capfin is another of the domestic worker’s creditors. Since January 2013, she has been granted nine microloans by Capfin.
When she was granted her last Capfin loan in December 2014, she was more than five months in arrears on both her Jet and Ackermans accounts.
The NCR applied to the National Consumer Tribunal this week to cancel Capfin’s registration because of reckless lending, Mashapa says.
African Bank & Standard Bank
A Cape Town cleaner and single mother of three earns R4 700 a month. She owes R85 900 to African Bank and Standard Bank.
Her credit report shows she took out three loans from African Bank, ranging from R26 200 in June 2012 to R55 450 in January 2014. The outstanding balance is now R60 029, and she stopped her repayments in August last year.
Her credit report also shows that, in November 2012, after she had acquired credit from African Bank, Standard Bank issued her with a credit card. The outstanding balance on the card is now R11 233.
She went on to obtain three personal loans from Standard Bank, two for R10 000 each and one for R5 000. She says she used one of the loans from African Bank to pay off one of the Standard Bank loans.
A bookkeeper from East London had a judgment against her, but Absa gave her finance for a Satinsky car. Furthermore, her credit report showed that her Absa home loan instalment was R4 423 a month, but her credit application stated that her total monthly debt repayments were R3 900 and that her total monthly living expenses were R1 000.
A receiving clerk in Durban was more than five months in arrears on his African Bank and Blue Bean credit cards when Absa granted him finance for a Satinsky car.
The NCA and RECKLESS LENDING
The National Credit Act (NCA) says that a credit provider must not enter into a credit agreement without first taking reasonable steps to assess a consumer’s:
* Debt repayment history;
* Existing financial means, prospects and obligations; and
* General understanding and appreciation of the risks and costs of the proposed credit, and his or her rights and obligations under the credit agreement.
The NCR says that if a court is presented with evidence that the credit provider failed to take these reasonable steps as required by law, the credit provider may be found to have acted recklessly. The Act provides for a court to apply three different remedies when credit was granted recklessly. The court may set aside the credit agreement, restructure it, or suspend it, depending on the circumstances.