If you have a debt problem, it could be the result of being offered more credit than you can manage as a result of what is known as reckless lending.
The aim of the National Credit Act is to ensure that providers extend credit responsibly which includes preventing reckless lending. The Act also provides for relief measures that can be enforced if you are a victim of reckless lending.
The National Credit Act obliges a credit provider to ascertain whether you can afford any credit granted to you by carrying out an affordability assessment.
This assessment aims to determine your discretionary income by considering your income and your expenses, including your existing debt repayments and living costs.
In terms of Section 80 (1) of the National Credit Act, reckless lending occurs in any one or all of these situations:
No affordability assessment was done to ensure you could afford to repay credit before it was granted;
You didn’t understand the risks, costs, or obligations of the credit agreement;
You were over-indebted when you were granted credit, or the additional credit you were granted resulted in you becoming over-indebted, but the credit provider still granted it to you;
You were under debt review when the credit was granted.
| REMEMBER: You can be granted credit that is regarded as reckless lending even if you not over-indebted – for example, if no affordability assessment was done or you did not understand the terms of the credit agreement. |
When you apply for credit, the credit provider will ask you about your income and expenses to work out how much you can afford to repay and therefore how much credit to grant you. You need to be completely honest about your finances and should 
not under-declare your expenses.
Provide all the relevant information that is requested; if you withhold information, you cannot accuse a creditor of reckless lending at a later stage.
If you accuse a creditor of reckless lending and it is found that you were not honest when you applied for credit, this can be used as a defence against the accusation. The credit provider will need to show that you were not honest or withheld important information, which impacted on their decision to grant you credit.
If you are unable to pay your debts, you cannot automatically accuse a credit provider of reckless lending. You need to prove that reckless lending has occurred in terms of the National Credit Act definitions. You will need these documents to support your case:
A copy of the credit agreement indicating the effective date;
If you have entered debt review and the counsellor suspects reckless lending, they will investigate your situation to see whether there is proof of this.
You do not have to be over-indebted to prove that you were granted credit recklessly. 
A debt counsellor or attorney specialising in debt relief can assess the situation and gather the relevant documentation from you and the credit provider. If they believe that there is substantial evidence of reckless lending, they will negotiate with the credit provider to try and resolve the matter without taking it to court. If this fails, the case will need to go to court and you must agree to this step because there are costs involved.
A debt counsellor’s charge for the service of investigating reckless lending can be up to R1 500, but they are only paid if they find evidence of reckless lending and submit a written report with their findings. If there is no evidence, no fee is charged.
If you decide to take the matter to court, you will incur additional legal fees. If you hire an attorney to conduct a reckless credit assessment, they will bill you at their discretion.
In terms of the NCA, you cannot apply for a declaration of reckless lending for:
Credit agreements entered into before June 2007;
School and student loans;
Emergency loans;
Pawn transactions; or
Public interest credit agreement
Declaring a credit agreement as reckless is done through a magistrate’s court or 
National Consumer Tribunal.
The debt counsellor’s written report is handed over to an attorney who drafts an affidavit. This forms part of the documentation presented to the magistrate’s court or National Consumer Tribunal with the application to declare the debt reckless.
The court then reviews all the evidence and makes a decision.
If the court or tribunal determines that the credit agreement was reckless, it may amend or cancel the agreement, and some or all of the debt may be written off.
If you have entered a debt review process, your debt may be restructured so that you can pay all your creditors and your living expenses.
The credit provider may also face legal action, as they are in violation of the National Credit Act.
If you can’t prove reckless lending, you will need to pay the debt in full, as well as the legal fees for your application for a declaration of reckless lending.
