Borrowers whose applications have been rejected by lenders, will be free to request a manual review, the European Commission proposes.
In its Directive of draft proposals, it revealed that lenders who reject an application on the basis of an automated decision like automated credit scoring, the lender must inform the consumer immediately, and at no cost to the consumer explain themselves to the applicant.
Under the draft proposals, a borrower’s creditworthiness will be assessed based on their income, savings, debts and other financial commitments.
The FSA’s Mortgage Market Review has already ruled that mortgage affordability must be assessed by lenders on a capital repayment basis over a maximum term of 25 years.
The MMR proposals state that if a borrower is unable to afford to repay the capital and interest then the mortgage is not affordable.
