(overrunning).
Before agreeing to lend to a borrower, you must assess the potential for the commitments under the regulated credit agreement to adversely impact the customer’s financial situation.
Proportionality of
assessments (G) The regulator sets out the circumstances to consider when firms determine the level of scrutiny in the assessment required.
Paragraphs 4.11, 4.12, 4.16 and 4.17 of ILG
There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
In your creditworthiness assessment, you should consider what is appropriate for the type and amount of the credit that is being sought and the potential risks to the customer.
5.3 Conduct of business in relation to creditworthiness and affordability Creditworthiness and
sustainability (R & G) The regulator sets out rules and guidance on considerations and the steps that firms must take when undertaking creditworthiness assessments.
Paragraphs 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.9, footnote 21 to paragraph 4.9 (box), 4.10, 4.13, 4.14, 4.15, 4.19, 4.29 of ILG
Guidance to rule:
Note that paragraph 4.19 of ILG is now a regulatory rule.
In addition, the following guidance has been introduced by the regulator:
CONC 5.3.1G(12):
Subject to the relevant legal constraints, FCA encourages the sharing between lenders of accurate data about the performance of a customer’s account and the settlement of outstanding debts, as the process of making the assessments in this chapter is assisted by lenders registering such data with credit reference agencies, in a timely manner.
You must implement policies and procedures to make a reasonable creditworthiness assessment, based on your consideration of sufficient, complete and correct information.
Unfair business practices: lenders (R & G)
The regulator sets out practices that constitute unfair business practices that firms must avoid when undertaking a creditworthiness assessment before entering a customer into a regulated credit agreement.
Paragraphs 4.24, 4.28, 4.30, 4.31 of ILG
There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Guidance to rule:
Note that paragraphs 4.24, 4.28, 4.30, 4.31 of ILG are now regulatory rules.
You must not base your creditworthiness assessment solely on the value of security provided by the customer, unless you take an article in pawn.
You must not encourage the customer to enter into an agreement for more credit than they have originally asked for, where in doing so, it is possible that the borrowing will be unsustainable.
You must not complete parts of the credit application for the customer, unless you have their consent or they are able to check how you have completed it before they sign.
You must not accept an application that you reasonably suspect has not been truthfully completed by the customer.
5.4 Conduct of business: credit brokers Application (R) Section 5.4 of CONC applies
to a firm with respect to credit broking.
N/A –
application N/A – application
Conduct of business
(R) The regulator sets out the
business conduct that is expected of credit broking firms.
Paragraphs 4.32 – 4.36, 4.41 of CBG
Guidance to rule:
Note that paragraphs 4.32 to 4.36 and 4.41j of CBG are now regulatory rules.
In giving explanations or advice, you must have regard to the customer’s needs and circumstances.
5.5 Creditworthiness assessment: P2P agreements Application (R & G) Section 5.5 of CONC
applies to firms with respect to operating an electronic system lending to prospective borrowers under a P2P agreement.
N/A – application
N/A – application
Creditworthiness
assessment (R) The regulator sets out the factors to consider when firms assess creditworthiness.
Paragraph 4.21
of ILG Guidance to rule:
Note that paragraph 4.21 of the ILG is now a regulatory rule.
In addition, the following rules have been introduced by the regulator:
CONC 5.5.3R:
1. Before a P2P agreement is made, a firm must undertake an assessment of the creditworthiness of the prospective borrower.
2. A firm carrying out the assessment in (1) must consider:
a. the potential for the commitments under the P2P agreement to adversely impact the prospective borrower’s financial situation, taking into account the information of which the firm is aware at the time the P2P agreement is to be made; and b. the ability of the prospective
borrower to make repayments as they fall due over the life of the P2P agreement, or for such an agreement which is an open-end agreement, to make repayments within a reasonable period.
3. A creditworthiness assessment must be based on sufficient information obtained from
a. a prospective borrower, where appropriate; and
b. a credit reference agency, where necessary.
4. This rule does not apply to an agreement under which a person takes an article in pawn.
CONC 5.5.4R:
Where CONC 5.5.3R applies to a firm, the firm must comply with CONC 5.3.2R, 5.3.4R, 5.3.5R, 5.3.6R and 5.3.7R to the same extent as if it were the lender under an agreement to which those rules apply and should take into account the guidance in CONC 5.3 to the same extent, and should also take into account CONC 5.2.3G and 5.2.4G treating them as guidance on CONC 5.5.3R.
CONC 5.5.6R:
Before a P2P agreement is entered into under which a person takes an article in pawn, the firm must:
1. undertake the assessment referred to in CONC 5.2.2R(1) of the prospective borrower; and
2. R, 5.3.6R and 5.3.7R to the same extent as if it were the lender under an agreement to which those rules apply, and should also take into account the guidance in CONC 5.2.3G and 5.2.4G and CONC 5.3 to the same extent.
You must assess the creditworthiness of the customer before you agree to lend to them.
In doing so, you must consider how such an agreement could damage the customer’s financial situation, and whether the customer is able to make repayments within a reasonable period.
6.1 Application
Application (R & G) CONC 6 applies to firms with respect to consumer credit lending, unless stated differently in a rule.
N/A –
application N/A – application
6.2 Assessment of creditworthiness: during agreement Assessment of
creditworthiness:
during agreement (R)
The regulator requires firms to carry out a creditworthiness assessment before significantly increasing the amount of credit to be provided or the credit limit for running-account credit under regulated credit agreements.
Sections 55B and 74 of CCA Paragraphs 4.1 – 4.3 and 4.21 of ILG
There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Guidance to rule:
Note that paragraphs 4.1 to 4.3 and 4.21 of ILG are now regulatory rules.
Legislation to rule:
Note that sections 55B(2), 74(1B), 74(1C), 74(1D) of CCA are now regulatory rules.
Before significantly increasing the amount of credit you provide to the customer or increasing their credit limit, you must assess their creditworthiness. In doing so, you must consider how such an increase could damage the customer’s financial situation, and whether the customer is able to make repayments within a reasonable period.
6.3 Information to be provided on a current account agreement and on significant overdrawing Application (R) Section 6.3 of CONC applies
to firms with respect to consumer credit lending, where the account-holder may be allowed to overdraw without a pre-arranged overdraft or exceed pre- arranged overdraft limit under a current account agreement.
N/A –
application N/A – application
Current account
information (R) The regulator requires the information contained in a current account agreement to be provided to the account-holder in writing at least annually.
Section 74A of CCA Article 18 of CCD
There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Legislation to rule:
Note that section 74A of CCA (which is a partial implementation of article 18 of CCD) is now a regulatory rule.
You must provide your account-holder customers with the information contained in their current account agreement in writing at least on an annual basis.
Information to be provided on significant overdrawing without prior arrangement (R)
The regulator sets out the circumstances where the holder of a current account must be informed without delay.
Section 74B of CCA
Article 18 of the CCD
There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Legislation to rule:
Note that section 74B of CCA and article 18 of CCD are now regulatory rules.
You must tell your account- holder customer immediately if they overdraw on their account and no pre-arranged overdraft is in place, or if they exceed their pre-arranged overdraft limit for more than a month.
6.4 Appropriation of payments
Application (R) Section 6.4 of CONC applies to firms with respect to consumer credit lending and to firms with respect to consumer hiring.
N/A –
application N/A – application
Appropriation (R) The regulator sets out their requirements on the firm where the firm is entitled to payments in relation to two or more regulated agreements from the same customer and where a payment made is not sufficient to discharge the total amount then due under all the agreements.
Section 81 of
CCA There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Legislation to rule:
Note that section 81(1) and 81(2) of CCA is now a regulatory rule.
You must allow the customer to make appropriate payments towards sums due under any two or more agreements, in the proportions that they think fit, otherwise, you must apply payments towards the sums relative to the proportions that those sums bear to one another.
6.5 Assignment of rights
Application (R) Section 6.5 of CONC applies to firms with respect to consumer credit lending.
N/A –application N/A –application
Notice of assignment (R) Where the rights of a lender are assigned to a third party firm, the regulator requires the firm to provide the borrower notice of this assignment.
Section 82A of CCA
Article 17 of CCD
Legislation to rule:
Note that section 82A of CCA and article 17 of CCD are now regulatory rules.
The regulator has set out CONC 6.5.2R(3) as a new rule requiring that the assignee must be a firm and that it must arrange a notice of assignment if it does not require authorisation:
CONC 6.5.2R (3):
A firm may assign the rights of a lender under a regulated credit agreement to a third party only if:
a. the third party is a firm; or
b. where the third party does not require authorisation, the firm has an agreement with the third party which requires the third party to arrange for a notice of assignment in accordance with CONC 6.5.2R(1).
In the event that you assign your rights as a lender to a third party, that party must arrange for notice of the assignment to be given to the borrower.
6.6 Pawn broking: conduct of business Application (R) Section 6.6 of CONC
applies to firms with respect to consumer credit lending and to firms with respect to consumer hiring.
N/A –
application N/A – application
Failure to supply copies of
pledge agreement etc (G) The regulator clarifies that sections 62 to 64 and 114(1) of the CCA continue to apply to a regulated credit agreement or a regulated consumer hire agreement to take any article in pawn.
Section 115 of
CCA There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
If you fail to observe your obligations under sections 62 – 64 and 114(1) of the Consumer Credit Act, you may be subject to disciplinary action by the regulator.
Pawn records: relating to articles under a regulated credit agreement (R)
The regulator sets out the record keeping requirements associated with firms’ dealings with an article in pawn under a regulated credit agreement.
Regulation 2(1) – 2(4) of SI 1983/1565
There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Legislation to rule:
Note that regulation 2(1), 2(2), 2(3),2(4) of SI 1983/1565 are now regulatory rules.
You must keep records that are sufficient to show and explain readily at any time all dealings with the article taken in pawn.
Information to be kept by a person who takes any article in pawn (R)
The regulator sets out the record keeping requirements on persons taking any article in pawn under a regulated consumer credit agreement.
Paragraphs 1 – 3 to Schedule to SI 1983/1565
There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Legislation to rule:
Note that paragraphs 1, 2 and 3 to Schedule to SI 1983/1565 are now regulatory rules.
You must maintain the information and data in relation to the taking of the article in pawn, in accordance with the requirements of CONC 6.6.7R (record of information), CONC 6.6.8R (date of redemption) and CONC 6.6.9R (information required when the article has become realisable).
6.7 Post contract: business practices Application (R) Section 6.7 of CONC
applies to firms with respect to consumer credit lending. 6.7.17R to 6.7.26R also apply to firms with respect to operating an electronic system lending to prospective borrowers under a P2P.
N/A –
application N/A – application
Business practices
(R & G) The regulator sets out their requirements on firms to monitor a customer’s repayment record.
Paragraph 6.2
and 6.16 of ILG There are no rules or guidance in this sub-section that do not feature in CCA/OFT regulation or legislation.
Guidance to rule:
Note that paragraph 6.2 of ILG is now a regulatory rule.
You must monitor your customers’ repayment records.
Credit card and store card requirements (R & G)
The regulator sets out their expectations on firms with regard to credit or store cards covered by a regulated credit agreement.
Paragraphs 6.3 – 6.11, 6.17, 6.18, 6.19 of ILG
Guidance to rule:
Note that paragraphs 6.3, 6.4, 6.4(box), 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.17, 6.18 and 6.19 of ILG are now regulatory rules.
In addition, the following rules have been introduced by the regulator:
CONC 6.7.5R (3):
CONC 6.7.5R (1) applies to agreements made