Reckless credit is prohibited under the NCA and is defined as lending money to customers without first:
- Ensuring they have enough income to pay it back.
- Assessing a customer's debt repayment history.
- Ensuring a customer understands the costs, risks and obligations of the credit agreement.
- Documents should be written in plain understandable language so all customers can understand them.
- Customers will receive a pre-agreement quote that will list all costs when borrowing money. This quote is valid for a minimum of five days.
The NCA specifies that customers may be required to pay the following as part of the principal debt:
- An initiation fee, connection fees, levies or charges.
- The cost of any extended warranty agreement.
- Service fees, default and collection fees.
- Taxes, licence or registration fees.
- Credit insurance.
Credit providers may require customers to take out credit life insurance for the duration of the agreement, however:
- The amount of insurance may not exceed the total outstanding debt owed to the credit provider under the agreement.
- Insurance must not exceed the full replacement value of a property or the outstanding amount on a vehicle agreement.
- Customers must be informed of their right to waive a proposed policy from the credit provider and provide a policy of their own choice.
- Where the credit provider arranges insurance for a customer, the credit provider may not charge any additional amount over and above the actual cost of the insurance.
The National Consumer Tribunal was launched on 1 September 2006. It acts as an informal court to resolve problems that customers experience with credit transactions, credit bureaus and credit providers.
Credit providers will have to report to the National Credit Regulator the volume and type of credit extended.