Find out more on the information you need to give customers when selling your products, and assessing a customer’s creditworthiness, including affordability.
Whether your products or services are sold online, over the phone or face to face, you need to consider the information needed by your customers and whether you have provided sufficient information to allow them to make an informed decision.
There are legislative requirements under the Consumer Credit Act on the provision of pre-contractual and contractual information. These fall primarily on the lender, but can also apply to a credit broker or other intermediary. In addition, rules in our Handbook require lenders or brokers to provide an adequate pre-contractual explanation. This explanation must highlight key costs and risks of the credit product and how it might impact on the individual customer.
The customer must be allowed time to consider the information, ask questions and request further information or explanations. Customers must not be subject to high-pressure selling, aggressive or oppressive behaviour or unfair coercion. All information must also be clear and not misleading.
Before lending to a customer, the firm must assess the customer’s creditworthiness, including affordability. In particular, the lender must be reasonably satisfied that the customer can afford the repayments and there will be no adverse impact on their overall financial situation. Our rules were updated in November 2018 following a consultation. We set out our expectations of lenders and clarify some key areas in our Policy Statement on assessing creditworthiness in consumer credit.
Additionally, where a credit broker gives advice or recommendations, it must consider the customer’s needs and circumstances, including whether the product is affordable and whether there are any factors that might make it unsuitable for the customer.
Firms must ensure that their staff have the skills, knowledge and experience needed to comply with our rules and treat customers fairly. They must also ensure that they adequately manage the risks arising from any incentive scheme they operate. We introduced new rules and guidance on this in our Policy Statement on staff incentives, remuneration and performance management in consumer credit firms.