Affordability - The Role of Household Income when Applying For Finance

Gary Warne | Manager: Legal Services Division

When it comes to applying for finance, the obligation upon credit providers to conduct an affordability assessment is necessary to ensure that the consumer does not become over indebted.

The case of Capitec Bank Limited v Mahlangu and Another (A16/2020) [2021] ZAMPHC 28 illustrates the importance of credit providers assessing not only one’s individual income but also household income (if applicable) when conducting affordability assessments.

In terms of the National Credit Act (“the NCA”) a credit provider must establish a borrower’s monthly income as well as household expenses, and conduct an affordability assessment, before granting credit.

In 2013 Capitec Bank Limited (“Capitec”) approved Mr Mahlangu’s application for a loan.

According to the affordability assessment conducted by Capitec, Mr Mahlangi’s household income was R 5 000,00 over and above his salary.

Capitec approved the loan based on Mr Mahlangu’s disposable income and did not request any documentary proof in respect of his household income.

Upon becoming over-indebted, Mr Mahlangu approached a debt counsellor who challenged Capitec’s decision to grant Mr Mahlangu finance by launching an application to court.

Capitec’s defence was that it wasn’t necessary for it to obtain proof of Mr Mahlangu’s household income due to the fact that Mr Mahlangu had qualified for the loan based on an assessment of his individual income.

The Magistrates Court ruled in favour of the debt counsellor and held that Capitec was guilty of reckless lending.

Capitec took the Magistrate’s judgment on appeal to the Mpumalanga High Court.


In its appeal, Capitec relied on section 81(4) of the NCA which states:

‘it is a complete defence to an allegation that a credit agreement is reckless if: (a) the credit provider establishes that the consumer failed to fully and truthfully answer any requests for information made by the credit provider as part of the assessment required…;
and (b) a court or the Tribunal determines that the consumer’s failure to do so materially affected the ability of the credit provider to make a proper assessment.’


The main issue in dispute was whether Capitec had an obligation to assess and investigate Mr Mahlangu’s disclosure that there was household income.


The High Court held that Capitec did have an obligation to assess and investigate Mr’s Mahlangu’s disclosure that there was household income.

The High Court further held that the defence raised by Capitec in terms of which it relied on section 81(4) of the NCA did not extinguish it’s obligation to assess Mr Mahlangu’s financial means. To do so would negate the purpose of the NCA.

Accordingly, Capitec’s appeal was dismissed.


It is confirmed that in terms of the NCA a credit provider must establish a borrower’s monthly income as well as household expenses and conduct an affordability assessment before granting credit.

A credit provider has an obligation to assess a consumer’s financial means when applying for credit which includes an obligation to investigate the consumer’s disclosure that there is household income.