DEBT

Should Debt Counsellors Be Charging For Reckless Lending Investigations?

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The 2009 NCR Task Team Report (and subsequent NCR guideline) discusses reckless credit and reckless credit investigations in detail.

Below are some of the key highlights of what the NCR currently expect Debt Counsellors to do in regard to reckless credit investigations (and thus any fees that would be charged) as per the guideline.

We will highlight some portions of the guideline below with reference to the section or point number:

Section 1 (introduction)

1.1b sets out that DCs must investigate if the consumer asks or if any ‘appear’ reckless (so an additional obligation in addition to the NCA requirements).

This then says the consumer does not have to be the one instigating the investigation. This then has been the procedure as set out by the NCR since 2009.

Annexure B. 1.4 e

The annexure clearly states that the Debt Counsellor should check for reckless lending.

Section 3.4 Reckless Lending

Here is a whole section on the topic. It states that DCs are obliged and encouraged, as part of the financial assessment, to identify reckless lending.

Note: So, any possible fee (eg as per an NCR fee guideline) would apply automatically since as per this section it is an obligation.

Annexure B

Here it talks about the situation where a Debt Counsellor starts to check for reckless lending and ask a credit provider for information but maybe the credit provider is unable to find the info or is slow in sending the info.

3.4 Reckless Lending

3.4.d says:

Where Credit Providers fail to provide the information on request within 20 business days, the Debt Counsellor should use the available information and refer the matter to a Court for a hearing. The Debt Counsellor is advised to inform the Court of the attempts to obtain detailed information with a recommendation that the Magistrate review the available information to make a finding on the reckless lending recommendation from the Debt Counsellor.

The abovementioned assessment should indicate if reckless lending was present.

Should the Debt Counsellor be unable to make a determination because of the Credit Provider being unwilling to provide the required information and where reckless lending is evident, the Debt Counsellor should submit his recommendation to a Magistrate Court.

Section 13

  1. Annexure b1 – Affordability Assessment Process Steps:
  2. Affordability Assessment

    …

  1. Check for Reckless Lending

    …

You will note that reckless credit investigation is set out as a step (no.6) above. So, any possible fee would apply automatically since it “has” to be done as one of these steps as set out since 2009 and the applicable NCR Guideline of 2015.

Section 14

  1. Annexure b2 – Affordability Assessment Check List

Step 14.6 – instructs to check for reckless lending as you will see below where it says quite clearly:

14.6 Check for Reckless Lending

  1. a) Follow reckless lending test guidelines

Section 16

16.6.d) If no information is received the Debt Counsellor should advise the Credit Provider that the lending could be reckless and make a recommendation that the debt be written off. If no reply is received before the scheduled Court date, include a recommendation of reckless lending to the Court and let the Court make a decision based on the information provided to the Court by all parties.

You will note that the current accepted conditions are that should no information be given, the recommendation regarding reckless credit is that the debt be written off and not deferred for payment after other debts. This seems to be a “motivator” for credit providers to provide the information swiftly.



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