The guidance clarifies what it considers to be irresponsible lending practices under the Consumer Credit Act, covering each stage of the lending process from the pre-contract stage of advertising credit through to the handling of arrears and default on agreements.
The OFT said lenders should: not use misleading or oppressive behaviour when advertising, selling, or enforcing a credit agreement; make a reasonable assessment of whether borrowers can afford repayments; clearly explain the key parts of any credit agreement to customers to allow them to make informed decisions; monitor the borrower’s repayment record during the agreement and offer assistance if they experience difficulties; and treat borrowers fairly if they do start to struggle with repayments.
Ray Watson, director of consumer credit for the OFT, said: “Our guidance makes clear to lenders the sort of practices that will be considered as evidence of irresponsible lending as we monitor businesses and their fitness to hold a credit licence. This guidance helps all lenders avoid the risk of engaging in behaviour or practices which may lead to action by the OFT.”
