Reckless Credit

In today’s consumer-oriented world, we want it all and we want it now and with the seamless swipe of a plastic card, it seems that we can indeed have it all… on credit. 

Having been enticed by the appeal of hire purchase scheme, tempted by the luxury of the lay-bye and lured in by the accessibility, convenience and relative ease of obtaining credit, it is unsurprising that today’s consumer would find themselves in the precarious position of having “bitten off more than they can chew.”

The harsh reality of credit is that we are constantly in debt and often more so than we care to admit or can really afford to be.  Countless South Africans find themselves trapped in the vicious cycle of taking out a loan to pay off another loan in a trend that is wreaking havoc with our credit ratings, destroying households and crippling small businesses.

Some say the fault is with the gullible and insatiable consumer who views credit as a right and not a privilege but the reality is that credit is a two-way street.  Consumers often cannot accurately gauge their financial commitments or simply do not understand the terms and implications of credit agreements and thus fall prey to loan sharks and other unscrupulous credit providers.

The National Credit Act takes legal cognisance of the fact that over-indebtedness is rife in South Africa and provides new and innovative solutions to consumers who should have been refused credit in the first place.  Now, it is not only up to consumers to exercise circumspection and restraint, but there is also an obligation on the credit provider to ensure that no “reckless credit” is extended to consumers.  Therefore, before entering into any credit agreement, section 81(2) of the Act obliges a credit provider to conduct an assessment as to the consumer’s understanding of the costs and risks of the proposed credit, to review their debt repayment history and to assess the consumer’s financial means, prospects and obligations.

These provisions in the Act have very real consequences as victims of “reckless credit” may now approach a court to have certain credit agreements set aside entirely or repayments suspended for a certain period of time.  Consumers may also be declared “over-indebted” in general and a debt counselor may be appointed to assess their financial commitments.  An investigation known as a debt review, set out in section 86 of the Act, will then take place in which the debt counselor may declare certain agreements to be “reckless credit,” recommend debt re-arrangement or facilitate payment plans with creditors so as to alleviate the financial burden on the over-indebted consumer.

Contact one of our knowledgeable attorneys today if you feel that you may be over-indebted or have been a victim of reckless credit at

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