SimplyBiz on creditworthiness and affordability

I mentioned in a previous article how focused the FCA is on treating customers fairly, and I’m sure you will have noticed that this principle sits firmly at the centre of all the guidance they issue.  Therefore I’m sure you won’t be surprised to hear that the most recent Business Plan issued by the regulator revealed an ongoing review into an area which is one of the most impactful for consumers: that of creditworthiness and affordability.

As you know, ‘creditworthiness’ is nothing more than appraising whether a customer can afford to repay a debt.   Of course, nobody can predict how an individual’s personal and financial circumstances could change in the future, but the FCA is keen to put a process in place through which affordability must be assessed by the broker or lender based on ‘sufficient information’ obtained from either the consumer themselves or, where necessary, from a database consultation.  

More detailed information on this matter can be found in sections five and six of CONC but, as assessing creditworthiness is part of the FCA’s policy on responsible lending, it is something they will be focusing on intently through this review, with the findings expected to lead to rule changes later in 2015.  One of the major difficulties surrounding creditworthiness is that acting in the client’s best interests might sometimes mean being forced to refuse to act in the way a client has requested.  It can be a challenging situation, and properly documenting and evidencing the steps you have followed to reach this decision may prove to be invaluable to you, both with the regulator and your customer.

AOBP’s Compliance Hub, powered by the Consumer Credit Centre, contains all the tools and guidance you need to ensure that your business adheres to the FCA’s responsible lending requirements; as you can tell, this is something of a moveable feast and it is imperative that you keep up-to-date with changing regulation.  The SimplyBiz Group, of which the Consumer Credit Centre is a part, has many years of experience and a highly skilled specialist team, and that’s why AOBP has chosen to partner with us.  

If you have any questions on the information in this article, or any other area of regulation or compliance support, please don’t hesitate to get in touch with the Consumer Credit Centre team on 01484 443424.

By David Golder, Client Proposition Director, Consumer Credit Centre, SimplyBiz Group