Over Indebtedness and Reckless Credit

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In order to prevent over-indebtedness and reckless credit :

• Credit Providers must conduct an extensive financial means test before entering into a credit agreement with a consumer
• Ascertain if the prospective consumer has the financial capacity for additional credit
• Severe penalties (including setting aside the initial agreement) can result if the Credit Provider fails to do this
• Credit Providers can determine their own scoring models, provided the results are fair and objective

Consumers must fully and truthfully answer requests for information when they are being assessed:

• The Credit Provider is protected against allegations of reckless credit where there was:
  • Dishonesty and/or part-disclosure by a consumer at the application stage

The concepts of over-indebtedness and reckless credit* do not apply to the following agreements and persons:

What is over-indebtedness and reckless credit?

• A consumer is over-indebted if it's assessed that they will be unable to meet all their financial obligations in a timely manner
  • Based on the majority of information available at the time of the assessment including their:
    • Financial means
    • History of debt repayment
  • Credit is reckless if:
    • The credit provider failed to conduct a proper assessment
    • The credit provider entered into an agreement that put the client in an over-indebted position
    • The consumer did not understand the risks, costs or obligations under the agreement
      • Client education plays a vital role in safe guarding against reckless credit by taking steps to ensure a client understands the contract and the consequences

Reckless credit agreements can:

• Be set aside
• Be restructured
• Be suspended
  • Client need not make further payments
  • No interest, fee or charge may be levied against the account
  • Credit providers rights are unforeseeable
    • When suspension ends, the rights and obligations are revived and become fully enforceable