New law to curb ‘reckless lending’

27 July 2006

South Africa’s Ombudsman for Banking Services is experiencing an increase in complaints from consumers who have run into financial trouble after taking up unsolicited offers of credit from the country’s major banks.

This is according to the Ombudsmans’ complaints investigation manager, Advocate John Simpson.

Simpson told the SA Press Association (Sapa) on Wednesday that once people started falling behind with their repayments, the interest and legal costs snowballed, often leaving the borrower with a lifelong financial burden.

“We suspect, from what we have heard, that the banks are engaging in an all-out drive to gather as many clients as they can ahead of the National Credit Act coming into force in June 2007,” Simpson told Sapa.

The new law aims to stamp out “reckless lending”, which includes entering into a credit agreement likely to leave the consumer over-indebted.

The Act will also prevent credit providers from increasing borrowers’ credit limits without first complying with prescribed formalities.

Source: BuaNews