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


The ruling was believed to be the first of its kind in the


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.


Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.