Factors leading to over-indebtedness include the prevalence of reckless lending caused by marketing of unsolicited loans, provision of pre-approved credit facilities, including credit cards and failure on the part of some credit providers to conduct affordability assessments”
In response the department released the “Draft National Credit Regulations for Affordability Assessment” (PDF 2.13MB), for comment submissions prior to 31 August 2014.
The draft regulations flow from The National Credit Amendment Act, signed into law in May 2014.
The draft regulations stipulate the criteria that credit providers must adhere to before credit can be extended. As stipulated in the regulations, credit providers will need to “ take practicable steps to assess the consumer or joint consumer’s allocatable income as well as their discretionary income to determine whether the consumer has the financial means and prospects to pay the proposed credit instalments”.