Reckless lending rockets despite law

DESPITE the practice being outlawed, reckless lending continues unabated – so much so that the National Consumer Tribunal (NCT) has received double the number of complaints.

The tribunal dealt with 9 589 cases in 2014/15 and in the 2015/16 financial year this figure rocketed to 19 097.

Over a three-year period, the tribunal’s case load had almost quadrupled. The figures emerged on Friday when the tribunal met the trade and industry portfolio committee.

Committee chairperson Joanmariae Fubbs said: “We have an act. We have laws, otherwise why make laws? I am distressed to hear that reckless lending is continuing.”

The committee heard how the tribunal struggled under a heavy case load filed by the National Credit Regulator (NCR). The tribunal members highlighted that reckless lending was a major issue despite amendments to the National Credit Act.

They recommended a new category of crimes be included in the act – to outlaw repeated or gross reckless lenders.

Fubbs said something needed to be done urgently. The committee wanted obstacles preventing the NCR from enforcing its mandate to be removed.

Referring to their annual report, credit ombud Nicky Lala Mohan said the most common cases dealt with were loan sharks, reckless lending and fraud. Reckless lending is when loans are given without certainty that the borrower can afford to repay the loan, leading to over-indebtedness.

To address the problem, the government had developed regulations to control lending. The regulations were to have been implemented on March 13 last year, but the Department of Trade and Industry suspended this until September 13 last year.

At the time the department’s director of credit law and policy, Siphamandla Kukani, said credit providers approached the department for more time because their IT systems were not yet compliant with the new structure.

Kukani said by September 14 last year the regulations would have been implemented and the department and the NCR would monitor credit providers to prevent any reckless lending. But currently more than half of credit-active consumers are still over-indebted.

Debt Rescue chairperson Neil Roets said with more vigilance on home and car loans, unsecured loans had become a way lenders were targeting consumers. “The NCA was amended to prevent reckless lending for those who cannot afford it. To give a loan to someone who cannot afford is illegal. But unfortunately the people who apply for these loans are usually poor, uneducated and cannot afford legal representation,” said Roets.

Many consumers who could not get loans from reputable lenders were so desperate they resorted to loan sharks, he said.

Roets said unscrupulous lenders would charge more than the legal 60% interest they were allowed.

Because they were not regulated, they got away with overcharging the very poor.

“But the fact that more people are complaining to the NCT is actually good news because it shows that people are becoming aware of their rights. They can get representation free of charge through the tribunal.”

The NCT can be reached at 012 683 8140 / 742 9900, Fax: 012 663 5693 or e-mail: Registry Also visit: http: //

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