Reckless lending, as defined by the National Credit Act (NCA), refers to a situation where a credit provider extends credit to a consumer in a manner that is considered irresponsible or careless. The NCA aims to protect consumers from unfair and exploitative lending practices, and it includes provisions specifically addressing reckless lending to ensure responsible lending behaviour.

According to the NCA, reckless lending occurs when a credit provider:

1. Fails to conduct a proper assessment of the consumer's creditworthiness before granting credit.

2. Grants credit to a consumer who is already over indebted or who would likely become over indebted as a result of the new credit agreement.

3. Fails to take reasonable steps to verify the consumer's financial situation and understanding of the risks and costs associated with the credit.

The Act emphasizes the importance of responsible lending practices to prevent consumers from taking on debt that they cannot afford to repay. Credit providers are required to assess a consumer's financial situation, including their income, expenses, and existing debt obligations, to determine whether they can afford the credit being offered.

If a credit agreement is found to be reckless, the NCA provides remedies for the consumer, including:

1. Setting aside or restructuring the credit agreement.

2. Reducing the outstanding balance on the credit agreement.

3. Suspending the right to enforce the agreement temporarily.

4. Refunding any amounts paid by the consumer and returning any property provided as security.

Credit providers found guilty of reckless lending may face penalties, including fines and other sanctions.

It's important for both consumers and credit providers to be aware of these provisions to ensure fair and responsible lending practices. Consumers are encouraged to be cautious when taking on credit and to seek advice if they believe they may be at risk of being granted credit recklessly.