Port Elizabeth - Absa bank was 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, the Herald Online reported on Friday.
Described as a landmark case, the Port Elizabeth Magistrate's 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
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 the bank would issue a statement later.