Nearly half of all non-bank personal loans in South Africa are delinquent. Not 10%. Not 20%. Forty-eight percent.
That number (from TransUnion’s Q4 2025 Consumer Credit Market report) lands differently depending on which side of the credit agreement you sit on. A 48% delinquency rate does not in itself prove systematic reckless lending: non-bank lenders serve higher-risk borrowers by design, and macroeconomic pressures affect repayment. But the gap between affordability on paper and repayment in practice signals that assessment methodology warrants scrutiny.
And when the National Credit Regulator scrutinises, the consequences are real. In its 2023/24 financial year alone, the NCR conducted 68 investigations into excessive cost of credit and reckless lending, referred 31 cases to the National Consumer Tribunal, and secured more than R98 million in consumer redress. At least one credit provider lost its registration entirely.
What reckless lending means: definition under the National Credit Act
“Reckless lending” has a specific statutory meaning. Section 80(1) of the NCA identifies three circumstances in which credit is reckless:
In short, reckless lending in South Africa means a credit provider:
- Granted credit without conducting an affordability assessment at all (Section 80(1)(a))
- Granted credit despite information showing the consumer did not understand the risks (Section 80(1)(b)(i))
- Granted credit that made, or would make, the consumer over-indebted (Section 80(1)(b)(ii))
Each is a distinct failure mode with different consequences.
Failure mode 1: No assessment conducted. Section 80(1)(a) applies when “the credit provider failed to conduct an assessment as required by section 81(2).” This is the strictest ground. If no assessment was performed, the credit is automatically reckless, regardless of whether the consumer could actually afford the repayments. The Free State High Court confirmed this in VKB Landbou v Van Deventer (2018): no assessment means reckless, period. There is no “but they could afford it anyway” defence.
Failure mode 2: Consumer didn’t understand. Section 80(1)(b)(i) applies when the credit provider did conduct an assessment but “the preponderance of information available to the credit provider indicated that the consumer did not generally understand or appreciate the consumer’s risks, costs or obligations under the proposed credit agreement.” This is not about illiteracy. It is about whether the credit provider had information, or should have had information, suggesting the consumer did not grasp what they were signing up for.
Failure mode 3: Consumer would become over-indebted. Section 80(1)(b)(ii) applies when the assessment showed, or should have shown, that “entering into that credit agreement would make the consumer over-indebted.” This is the most common ground in practice, and it is where affordability assessment methodology matters most.
The Shoprite case (2019) is the clearest illustration. Shoprite extended credit to consumers who had negative disposable income both before and after the loans. One consumer’s monthly income fell R3,319 short of expenses before the loan and R3,542 short afterward. Two pensioners in their sixties were lent money despite being hundreds of rands in deficit. The NCT fined Shoprite R1 million and ordered it to appoint a debt counsellor at its own expense.
In a separate 2017 complaint referred to the NCR and Ombudsman for Banking Services, a financially unsophisticated domestic worker received a personal loan of R30,182 at 35.4% annual interest (roughly 5.5 times her monthly salary) plus two credit cards. Nedbank admitted the second card should not have been granted. The case illustrates how extending multiple credit products without cumulative assessment compounds the risk of an over-indebtedness finding.
The temporal rule matters. Section 80(2) states that assessments must be judged by criteria “at the time the agreement was made.” Section 80(2)’s temporal rule primarily protects consumers: a court cannot use post-origination improvement in the consumer’s circumstances to excuse a deficient assessment. If information available at origination pointed to over-indebtedness and the credit provider ignored it, no later change in circumstances alters the finding.
What Section 81 requires before granting credit
Section 81(2) sets out what a credit provider must assess before entering any credit agreement. The obligation is specific: take reasonable steps to assess the consumer’s understanding of the credit, their debt repayment history, and their “existing financial means, prospects and obligations.”
This is where Regulation 23A provides the methodology. The formula is straightforward:
Discretionary Income = Gross Income − Tax − Existing Financial Obligations − Minimum Living Expenses
If discretionary income is negative, the consumer cannot afford the credit. But the detail matters more than the formula. Regulation 23A(2) excludes certain agreement types (including developmental credit agreements, school loans, and pawn transactions) from its affordability assessment requirements.
Income verification under Reg 23A distinguishes three categories. Salaried employees require payslips and/or bank statements. Non-salaried workers require income proof and/or bank statements. Self-employed individuals require bank statements and/or financial statements. Where income fluctuates (common in commission-based or gig employment), Regulation 23A(5) requires averaging gross income over a minimum of three pay periods, not relying on the most recent payslip.
In Absa v De Beer (2016 GP), the court held that credit providers should rely only on “reliable, consistent, and sustainable income,” a principle that has become the practical standard for income verification. Income from a fixed-term contract, commission-based work, or irregular employment warrants additional scrutiny: the standard requires evidence of continuity, not merely the existence of current income.
Expense norms are prescribed in Table 1 of Reg 23A, published in Government Gazette 38557 in March 2015. These values have not been updated or inflation-indexed since their original publication, over eleven years ago. A credit provider relying on 2015 minimum living expenses in 2026 without applying reasonable judgment about actual living costs is building an affordability assessment on an outdated foundation. A credit provider that approves a loan where the consumer’s actual expenses substantially exceed the 2015 minimums may struggle to demonstrate a “fair and objective” assessment, the standard applied in the Shoprite judgment.
The credit provider defence under Section 81(4) is narrower than many providers assume. It requires proving both that the consumer “failed to fully and truthfully answer” requests for information and that this failure “materially affected the ability of the credit provider to make a proper assessment.” Both prongs must be satisfied. A signed consumer declaration alone is insufficient if the credit provider had access to other information (such as bank statements) that contradicted the consumer’s disclosure.
Note that credit facilities and revolving products (overdrafts, credit cards) are subject to additional rules under Section 80(3): the assessment obligation applies on renewal, limit increases, and material changes, not just origination.
How to prove reckless lending: the path from complaint to tribunal
The pathway from lending to a reckless lending NCA finding involves three actors: the consumer (or their debt counsellor), the NCR, and the National Consumer Tribunal. Debt counsellors registered with DCASA play a particularly active role, with a structured process for investigating whether credit agreements were recklessly granted.
Consumer complaints are the most common trigger. The NCR received 1,950 complaints in its 2023/24 financial year; reckless lending was a frequently cited category. But complaints are not the only route. The Supreme Court of Appeal confirmed in NCR v Dacqup Finances (2022) that the NCR needs only “reasonable suspicion” to investigate, and that hearsay evidence, media reports, or even an inspector observing a sign can suffice. The standard is deliberately low.
NCR investigations follow. In 2023/24, the NCR conducted 430 desktop and on-site monitoring exercises focused on reckless lending compliance, resulting in 54 enforcement actions and 318 instructional letters to non-compliant providers. The NCR noted “an increase in non-compliance with affordability assessments.” Eight investigations specifically targeted credit providers using payroll deductions who had failed to conduct any affordability assessment. Eighteen raid investigations, conducted jointly with the South African Police Service across seven provinces, targeted providers illegally retaining consumers’ identity documents and bank cards.
NCT adjudication is where consequences materialise. In the 14 NCT judgments secured in 2023/24, all confirmed prohibited conduct. Providers were ordered to refund loan repayments and interest charges, in addition to administrative fines totalling R1.765 million. In the most serious case, the NCT ordered the immediate cancellation of a credit provider’s registration after finding systematic assessment failures.
The scale of redress is significant: R98 million was secured for consumers across all NCR activities, with R94 million coming from compliance monitoring alone, affecting 127,816 consumers.
What lenders get wrong: the most common reckless lending cases in South Africa
Court cases and NCR enforcement data show the same failures recurring.
Manipulating or ignoring expense calculations. The Shoprite case is the archetype. Shoprite’s assessment methodology disregarded or manipulated pre-existing debt obligations to approve new credit. It presumed spouse income without verification or consumer consultation. The court found the “evaluation mechanisms and procedures used by the retailer did not bring about a fair and objective result.” If your affordability model allows credit to consumers with negative disposable income, your model is the problem.
Accepting gross income without verification. The Absa v De Beer standard requires “reliable, consistent, and sustainable income.” Payslips show stated income. Bank statements show what actually arrived, and how regularly. A provider relying on a single payslip from a short-term contract, without corroborating the income pattern in bank statement data, faces the same evidentiary weakness the courts have repeatedly flagged.
Failing to document the assessment at origination. The assessment must be contemporaneous: created at the time of origination, not reconstructed after a complaint. The VKB Landbou principle is unforgiving: no documentation of an assessment means no assessment was conducted, which means automatic reckless credit under Section 80(1)(a). The NCR’s 430 monitoring exercises specifically examine whether assessment records exist and whether they are credible.
Extending multiple credit products without cumulative assessment. The 2017 Nedbank complaint involved a personal loan plus two credit cards. Each product individually might have appeared affordable, but the cumulative effect created unsustainable debt. Credit providers must assess the total position (existing obligations plus the proposed new credit), not each agreement in isolation.
Treating the assessment as a tick-box exercise. Applying outdated expense norms mechanically, running a bureau check without examining the underlying data, approving an application because the formula produced a positive number even when the inputs were questionable: this is compliance theatre, not substantive assessment. Courts have consistently examined whether the credit provider engaged with the substance of the consumer’s financial position, not just whether a form was completed.
Building a defensible affordability process
A defensible process produces a documented, verifiable record showing the credit provider took reasonable steps to assess the consumer’s position.
Verify income from multiple sources. Payslips confirm employment. Bank statements confirm that the stated salary actually arrives, how regularly it arrives, and whether there are other income sources or deductions that payslips do not reveal. For fluctuating income, Reg 23A(5) requires at least three pay periods.
Enumerate all obligations, not just bureau-reported ones. Bureau records reflect what has been reported, typically on monthly submission cycles. Bank statements show debit orders, loan repayments, and recurring outflows in real time, including obligations to lenders who report to different bureaus or do not report at all. This is where loan stacking becomes visible.
Apply expense norms with judgment. The Reg 23A Table 1 minimums are a floor, not a ceiling. Where actual spending data exceeds the statutory minimums, the higher figure should inform the assessment. Applying bare minimums when evidence of higher spending exists creates the gap that reckless credit findings exploit.
Screen for behavioural risk signals. Gambling spend is a recognised financial stress indicator, one that a bank statement captures but a payslip or bureau report does not. The same applies to multiple short-term lender debits, returned debit orders, and account sweeping on payday. These patterns matter because the 48% non-bank delinquency rate suggests that affordability-on-paper is not always affordability-in-practice.
Produce a timestamped, exportable assessment record. The record should show what income was verified, what obligations were identified, what expense norms were applied, what discretionary income was calculated, and when the assessment was performed. If the NCR or NCT examines the agreement three years later, this record is the credit provider’s primary defence.
AffyScore’s decision pack is built around this requirement. It extracts income, obligations, and spending patterns from bank statements, applies the Reg 23A formula (Gross Income minus Tax, Financial Obligations, and Minimum Living Expenses) using inputs extracted from bank statements, and produces a dated, exportable affordability record at origination. The output is structured to satisfy Reg 23A evidence requirements, though compliance itself remains the credit provider’s responsibility.
What happens when a court finds reckless credit
Section 83 gives courts and the NCT remedies that vary depending on which ground of recklessness is found.
For no-assessment or consumer-didn’t-understand findings (Section 80(1)(a) or (b)(i)), Section 83(2) allows courts to either set aside all or part of the consumer’s rights and obligations “as the court determines just and reasonable in the circumstances,” or suspend the force and effect of the credit agreement entirely. In practice, set-aside means the credit provider can lose part or all of the outstanding debt.
For over-indebtedness findings (Section 80(1)(b)(ii)), Section 83(3) requires the court to examine whether the consumer is over-indebted and may then suspend the agreement until a specified date, or restructure obligations across multiple credit agreements under Section 87, reducing payments, extending terms, or redistributing priority among creditors, all at the credit provider’s expense.
Beyond the statutory remedies, the practical consequences compound. In the 14 NCT judgments secured in 2023/24, providers were ordered to refund loan repayments and interest charges in addition to administrative fines. The R98 million in consumer redress secured in a single financial year illustrates the scale. And for repeat offenders, registration cancellation ends the business entirely.
The lesson from African Bank is the most sobering. African Bank was placed under curatorship in August 2014 after its aggressive unsecured lending model collapsed, one of SA’s most significant reckless lending cases. The NCR subsequently levied a R300 million fine in 2016, the largest in SA history, later settled at R20 million. But the reputational and operational damage was already done. Its lending model remains the industry’s definitive warning.
The SCA’s 2025 decision in ABSA Bank Ltd v Serfontein added another dimension: parties cannot contract out of NCA protections through supplementary agreements or restructuring documents. The Act applies regardless of what the credit agreement says.
The bottom line
Reckless lending under the NCA is not ambiguous. The National Credit Act defines what constitutes reckless credit. Section 81 prescribes the assessment obligation. Regulation 23A provides the methodology. Six court and tribunal decisions cited in this article confirm the pattern: credit providers who skip the assessment, manipulate the inputs, or ignore the outputs face consequences.
For the 8,218 registered credit providers in South Africa (NCR, June 2026), and particularly for the micro-lenders and non-bank lenders whose borrowers show a 48% delinquency rate, the question is not whether the NCR will investigate. It conducted 430 monitoring exercises last year, many resulting in instructional letters or formal enforcement. The question is whether your affordability process will withstand scrutiny when it does.
