Banking Ombud Rules on Reckless Lending at Ubank

Ubank in Trouble Over Reckless Lending Matter

Mr Mojalefa received four loans to the tune of R 225 727 from Ubank. This required that Mr Mojalefa had to make R9563 each month out of his salary as a mine worker. This would prove to be difficult since he only earned R6 792 each month.

When a consumer is granted credit they cannot afford to realistically repay (or where a credit provider doesn’t check if they can or understand their obligations) this is called “reckless credit”.

When Ubank gave Mr Mojalefa so much credit that he could not possibly repay on his salary (he had no other source of income) this was reckless.

Fortunately for Mr Mojalefa, he was able to reach out to a Debt Counsellor (and Alternative Dispute Resolution Agent) who suggested talking to the Banking Ombud (Ombud for Banking Services) about what had happened. This is what they did.

Given the overwhelmingly simple maths involved, the Banking Ombud has told Ubank to write off the debts (normally these matters would be referred both to the NCR for investigation and the National Consumer Tribunal for a ruling or similar court).

Ubank say that the multiple loans were mistakenly given to the consumer due to a system error which they have since addressed. Even though the Banking Ombud has ruled on the matter and Ubank have decided to cooperate this does not rule out further investigation and action from the NCR & NCT who can issue fines of hundreds of thousands of Rands.

The NCR & Reckless Credit

The NCR recently decided to no longer financially incentivise Debt Counsellors to investigate reckless credit after a sudden spike in investigations by Debt Counsellors. They have removed a professional fee for this work from their proposed industry guidelines for debt counselling fees. [read more about that here]

 

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