Loans, clothing accounts, expensive furniture buys and credit upon credit. The South African consumer’s debt struggle is heart-wrenching and unfortunately very real. Then there is also reckless credit to worry about.

According to the National Credit Act (that aims to be fair and non-discriminatory), all consumers have the right to apply for credit (section 60). Be that as it may, credit providers and consumers have to do everything within their power to avoid debt escalating as a result of reckless lending OR borrowing.

The National Credit Regulator (NCR) indicates that the total outstanding consumer credit in South Africa was R1.73 trillion at the end of September 2017. And, credit bureaus held records for 25.08 million credit-active consumers where 9.87 million consumers reflected impaired records.

Reckless credit can be described as two sides of the same coin – for one, creditors may be responsible for ‘reckless lending’. They, therefore, need to take caution, using their discretion when approving credit. And, secondly, consumers should not be counted out when it comes to ‘reckless borrowing’. Consumers are in control of their own finances and have to take responsibility when applying for credit.

The following sides of the reckless credit coin should be taken into account:

Creditors

• Credit providers should not deliberately or negligently enter into an agreement with a consumer knowing that it could cause or aggravate over-indebtedness.
• Credit providers are protected by the National Credit Act if they followed the necessary steps to determine if a consumer is eligible for credit (like a loan).
• Credit providers’ credit policies differ and each provider should make sure that careful discretion is used when granting credit to a consumer during their protocol.

Consumers

• Consumers have to be sure when applying for credit that they can really afford it. They can do the necessary research beforehand and shop around for better prices.
• Consumers should not think that they are always in the clear when it comes to reckless credit – they need to disclose all the info needed for the credit providers to make proper affordability assessments.
• For those consumers that will apply for Debt Review – as of the 1st of April 2018, the National Credit Regulator (NCR) requires that each credit agreement (included in the process) should be investigated for reckless credit. The aim hereof is to avoid debt spiralling out of control.

Regarding the above, it is therefore evident and of utmost importance that consumers (borrowers/spenders) and creditors (lenders) take caution to avoid reckless credit dilemmas.