Absa bank has been found guilty of reckless lending after granting a Port Elizabeth pensioner a loan - despite knowing the instalments would be more than his entire monthly income.
The Herald Online reports that the Port Elizabeth Magistrate’s Court found that the issuing of the bond was reckless and that the loan should be scrapped.
The bank had granted the 81-year-old pensioner a home loan of R350,000.
This while the man and his wife earned a monthly income of R3,700.
They had household expenditure of R2,472 - and the monthly instalment on the bond was R4,200.
The man defaulted on his repayments and the bank threatened to repossess his home in Lorraine.
Debt counsellors took up his case and went to court.
The ruling was believed to be the first of its kind in the country.
Banking ombudsman Clive Pillay said banks should know they were not above the law and should comply with the National Credit Act (NCA).
The act was specifically drawn up to protect consumers from becoming overly indebted. It had been in effect for four months when the pensioner signed the loan agreement with Absa.
The Herald Online reports that the Port Elizabeth Magistrate’s Court found that the issuing of the bond was reckless and that the loan should be scrapped.
The bank had granted the 81-year-old pensioner a home loan of R350,000.
This while the man and his wife earned a monthly income of R3,700.
They had household expenditure of R2,472 - and the monthly instalment on the bond was R4,200.
The man defaulted on his repayments and the bank threatened to repossess his home in Lorraine.
Debt counsellors took up his case and went to court.
The ruling was believed to be the first of its kind in the country.
Banking ombudsman Clive Pillay said banks should know they were not above the law and should comply with the National Credit Act (NCA).
The act was specifically drawn up to protect consumers from becoming overly indebted. It had been in effect for four months when the pensioner signed the loan agreement with Absa.
- Sowetan - Sapa - Herald Online
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