Exam (elaborations)
COL3704 Assignment 3 Semester 2 2023
- Course
- COL3704 (COL3704)
- Institution
- University Of South Africa
QUESTIONS AND ANSWERS
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COL3704Assignment 3
Semester 2 2023
QUESTIONS AND ANSWERS
[School]
[Course title]
, COL3704 Assignment 3 Semester 2 2023
QUESTION 1
On 13 March, Alvereen Leonard approached three different credit providers
and applied for credit. First, she approached Easy Loans and applied for a R5
000 loan to pay her outstanding utility bills. Next, she approached a second-
hand car dealer, Cars at Cost, and purchased a R10 000 car on credit. She
then went to ABC Loans for a loan of R20 000 to pay for her daughter’s
school fees. Financial assessments were only conducted at Cars at Cost and
ABC Loans. She did not include any information about the two former
applications during the assessment that was done by ABC Loans. Alvereen
was granted credit by all three providers. Subsequent to this, she started
defaulting on her payments. Explain whether any of these credit agreements
will be deemed reckless. (8)
To determine if any of these credit agreements will be deemed reckless, we need to
consider the criteria for reckless lending, which typically involves providing credit
to a consumer when it is clear that the consumer cannot afford it and without
conducting proper affordability assessments. Here's an analysis of each credit
agreement:
Easy Loans (R5,000 loan for utility bills):
It is not mentioned whether Easy Loans conducted a financial assessment.
Without knowing if Easy Loans assessed Alvereen's affordability, it's difficult to
conclude if this credit agreement was reckless. If Easy Loans approved the loan
without verifying her ability to repay, it could potentially be considered reckless
lending.
Cars at Cost (R10,000 car purchase on credit):
Financial assessments were conducted at Cars at Cost.
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