Lenders in the UK are regulated by the Financial Conduct Authority FCA) and must abide by the FCA Handbook, which sets out instructions to firms for responsible lending.
This article talks about good lending practices which will not always be legally binding on firms but are intended as a guide to customers on how responsible lenders should deal with customers from first to last contact. They are different to and should not be confused with the FCA’s Handbook rules and regulations.
All lenders should ensure that they have adequate policies, processes and controls in place which ensure that customers receive a fair treatment throughout the full lifecycle of the product. What does that mean for you as the customer?
If a company is lending you money, it must have the permission from the FCA to do so. You can easily find out if your lender is regulated by searching the FCA register. If the lender is not listed on the FCA database you may be dealing with an illegal lender, sometimes known as a loan shark. If you suspect that you may have been targeted by an unlicensed lender, the England Illegal Money Lending Team can support you, and help to investigate and prosecute an illegal lender.
Once you have established that your chosen lender is regulated by the FCA you will also want to check whether you are taking out credit directly from a lender or via a credit broker. Direct lenders manage the lending process themselves as opposed to credit brokers who act as a middleman and hand over your credit request and personal data to direct lenders, often for a commission fee.
Before borrowing, you can also consider factors such as the company’s reputation. Previous customers will often leave their opinions on a review site which might help you to understand what other borrowers’ experience with the lender was like. Although it might be worth remembering that there are always two sides to every story so make sure to read their reviews with a balanced outlook.
Integrity should be at the heart of the company’s values. A conscientious lender will ensure that they are acting responsibly towards potential borrowers even at the stages before the customer has made an application. What this means in practical terms is that the creditor should consider your individual circumstances and only suggest a product that is affordable to you and that will meet your needs at the time of the application. Most lenders will carry out a creditworthiness check to determine your eligibility for obtaining credit. If you are being offered money that you know you can’t afford to pay back comfortably, you should steer clear of entering into an agreement.
A good lender will establish a clear line of communication with their customers across the whole lifecycle of the product – from application to fulfilling the contractual obligations.
Transparency is a key quality to look out for when choosing a creditor. All information about the product should be presented to you clearly so that the key features and risks of the product, including interest rates, fees and charges are easy to understand and explained fully.
The lender should not knowingly mislead you into taking credit, but don’t be an ostrich when it comes to your credit agreement. If you have questions, check the FAQs or ask your lender – they’re there to help. A sensible lender will understand that the legal language of the terms and conditions in your agreement may be ambiguous or not easily digestible and will take the time to go through and answer all your questions fully.
Furthermore, it is important to maintain an open channel of communication even after you take out credit. Lenders have the responsibility to keep you updated and well informed on the status of your account. This may come in the form of upcoming or missed payment reminders, or requesting that you get in touch to discuss your account. All your enquiries should receive a response in a timely manner and all information relayed back to you should be clear, including instructions for any action you may need to take.
If you are struggling to get a response from your chosen lender, they are not expressing information in an understandable format or a good level of communication is not maintained before or after you have been given credit, you may be encountering the tell-tale signs of an irresponsible lender.
Not everything always goes according to plan and customers may require varying levels of support and different arrangements to repay their credit in a way they can afford. Whether you are in a vulnerable position or experiencing financial difficulty, the creditor should take steps to help you repay your debt in a positive and sympathetic manner.
However, even the most experienced lenders may struggle to identify the subtle signs of vulnerability and financial stress so it is important that you fulfil your role as a responsible borrower and clearly communicate to your lender that you are experiencing difficulty with meeting your agreed repayment schedule.
A competent lender will understand that sometimes it may be difficult to discuss the circumstances that are preventing you from making your repayment, but they will nonetheless do their best to help you from spiralling into further financial difficulty. Most creditors will have a range of measures in place to help customers manage their finances appropriately, and your lender will inform you of the options available to you and will gladly work with you to arrange an affordable repayment solution tailored to your specific needs. This may include freezing your balance, setting up a repayment plan and directing you to free and impartial debt advice.
If your lender is not acknowledging the change in your circumstances and is inflicting undue pressure on you to meet unreasonable repayment options, they are not taking the appropriate steps to help you deal with your debt in the most suitable way. In this scenario, it is important to know that there are organisations where you can seek free debt advice at any time.
If you suspect that you have been given credit when it was not appropriate to do so, you have the right to submit a complaint to the creditor. A responsible company will acknowledge your complaint in a timely manner, and you should receive the full response within 8 weeks of submission.
If you believe that your complaint was not handled fairly, you can ask the Financial Ombudsman Service (FOS) for an independent review. You will only be able to refer your complaint to the FOS, if you have raised your complaint directly with the lender first and if you contact FOS within six months of receiving the final response from the lender. Complaints received outside of this deadline will only be reconsidered in exceptional circumstances.
At Polar Credit, our customers are at the heart of what we do. We are proud to say that we are a responsible and FCA regulated lender. This is why we take great care when assessing applications from new customers and reward our existing customers with lower interest rates. We created Polar Credit to provide our customers with an innovative solution to their credit needs.
But don’t just take our word for it! Check out our customers’ experience with Polar Credit.
You can trust that we will treat you fairly and work with you to find the most appropriate solution to your individual needs. If you need our help please do not hesitate to contact us.
More questions? Check out our FAQ section.