Post National Credit Act reckless lending in the South African banking industry

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One of the main aims of the National Credit Act (NCA) of 2005 in South Africa is to curtail rising consumer over-indebtedness by encouraging credit providers to adopt responsible lending practices. This research study seeks to ascertain whether the NCA’s responsible lending requirements have limited reckless lending by credit providers. Data are collected by a telephonic survey amongst debt counselors and in-depth interviews amongst bank employees. Descriptive statistics are used to analyze data from the descriptive survey, while data from in-depth interviews are analyzed using the thematic approach. Credit providers have divided opinions on whether the NCA limits reckless lending practices. Debt counselors claimed that credit providers are lending irresponsibly. By contrast, insights obtained from bank employees indicate compliance. However, both agree that borrowers are not borrowing responsibly. As a result, consumer education is required to educate consumers on both the benefits and risks of borrowing. It is also recommended that lenders be audited for compliance to the Credit act.

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    • Fig. 1. Drivers of consumer over-indebtedness in SA
    • Fig. 2. NCA’s effectiveness in curbing reckless lending practices
    • Fig. 3. Percentage of cases caused by reckless lending
    • Fig. 4. Specific reckless lending practices
    • Table 1. Reasons why it is borrowers’ fault