The money or the box: Perspectives on reckless credit in terms of the National Credit Act 34 of 2005

Abstract

The National Credit Act 34 of 2005 introduced the concept of reckless credit for the first time in South African consumer protection legislation.  The Act aims to prevent reckless credit lending by making pre-agreement assessments mandatory in terms of section 81 and providing for various debt relief remedies where credit has been extended recklessly.  The courts have been granted various powers depending on the type of reckless credit which has been granted.  Considerable uncertainty exists as to the bases upon which the court’s power to order a partial or total setting aside of the rights and duties of the consumer to whom reckless credit has been granted, as set out in section 80(1)(a) and 80(1)(b)(ii), should be exercised.  Furthermore, regarding the aforementioned types of reckless credit lending, it is not clear on what basis a court should decide between a partial setting aside of the consumer’s rights and obligations and a suspension of the force and effect of the agreement.   This discussion undertakes a practical investigation into the nature of reckless credit and the manner in which a pre-agreement assessment should be done.  The remedies for reckless credit lending are analysed in an effort to determine the practical impact of the court’s powers in respect of the different cases of reckless credit for which the NCA provides.  The procedural implications of reckless credit are also investigated.