Absa guilty of reckless lending

2010-04-30 07:52

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.


Described as a landmark case, the Port Elizabeth Magistrates Court

found this week that the issuing of the bond was reckless and that the loan

should be scrapped.


The bank granted the 81-year-old pensioner a home loan of R350?000,

while the man, who asked not to be named, and his wife earned a monthly income

of R3?700.

They had a 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.


An Absa spokesperson told the Herald Online that the bank would

issue a statement later.

 

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