Under the National Credit Act (NCA) Act No. 34 of 2005, applying for a debt consolidation loan for people under debt review is deemed to be 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. It is a bad idea to apply for a debt consolidation loan for people under debt review. If the debt consolidation loan is obtained from a debt consolidation loan shark, it will put the person under debt review in a much more difficult situation should they fail to honour the repayments. Regrettably, due to ignorance many people are still losing their homes, cars, furniture, hard-earned valuables, their salaries because of applying for a debt consolidation loan for people under debt review.
The National Credit Act (NCA) introduced debt counselling as a formal debt relief measure whereby a debt counsellor determines whether a consumer is or unable to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party. One of the purposes of the Act is to promote responsible credit granting and avoid over-indebtedness. The Act also discourages reckless lending by credit providers and contractual defaults by consumers. However, many people are unaware of their consumer rights and how the Act protects them.
If the credit provider knew that the consumer is under debt review and has been declared over indebted and proceeds to enter into the proposed credit agreement that would cause the consumer to sink deeper into debt, such credit agreement is classified as reckless lending practice. Lending is considered as reckless when 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.
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