What is reckless lending?
A credit agreement is reckless if the creditor fails to conduct a detailed financial assessment on behalf of the client and still offers them credit. If the consumer does not understand the risks, costs and obligations created by the proposed credit agreement, such credit agreement is considered as reckless lending.
If the credit provider conducts an assessment and conclude that entering into the proposed credit agreement would cause the potential consumer to become over-indebted, but still enters into the credit agreement with the consumer, such credit agreement is classified as reckless lending practice.
Consumers are required to fully and truthfully answer the requests for information that creditors put to them. Creditors on the other hand are experts at financial matters and they use very sophisticated computer programs to figure out what the consumer can and cannot afford so they must be certain about the consumer’s financial status before they offer credit.
Lending is considered as reckless when:
- The consumer didn’t get a quotation of what the credit will cost them.
- The consumer did not understand the documents shown about the credit.
- The consumer cannot read the language of the documents about the credit.
- The credit provider knew the consumer couldn’t afford to repay the credit.
If a credit provider gives a consumer credit recklessly, a court can decide to either make the reckless credit provider wait till after all other debt is repaid before they receive a cent or the debt can be written off.
If you have been a victim of reckless lending, contact Debt Sage on 010 005 5350 and one of our consultants will assist you.