[INSIGHTS]: FLA Lending Code

External Links:

https://www.fla.org.uk/consumer-information/lending-code/

Summary

The FLA Lending Code 2021 is a guide and policy for FLA members who provide consumer credit loans or second charge mortgages. The code sets out standards of good practice in consumer lending and summarizes how customers can expect to be treated by FLA members. The code covers a range of topics, including advertising, sales, creditworthiness assessment, arrears and default, and debt collection. The code requires FLA members to treat customers fairly, transparently, and responsibly, and to provide clear and accurate information about their products and services. The code also requires FLA members to comply with relevant laws and regulations, and to maintain high standards of professionalism and ethical conduct. The code provides a framework for resolving disputes between FLA members and their customers, and for reporting and addressing breaches of the code. The code is regularly reviewed and updated to reflect changes in the regulatory and market environment, and to ensure that it remains relevant and effective in protecting consumers. The guidance for firms includes recommendations for advertising, creditworthiness assessment, information provision, fair treatment, risk management, governance, complaints handling, and breach reporting.

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Key Points

The FLA Lending Code 2021 sets out standards of good practice in consumer lending and summarizes how customers can expect to be treated by FLA members.
The code covers a range of topics, including advertising, sales, creditworthiness assessment, arrears and default, and debt collection.
The code requires FLA members to treat customers fairly, transparently, and responsibly, and to provide clear and accurate information about their products and services.
The code also requires FLA members to comply with relevant laws and regulations, and to maintain high standards of professionalism and ethical conduct.
The code provides a framework for resolving disputes between FLA members and their customers, and for reporting and addressing breaches of the code.
The code is regularly reviewed and updated to reflect changes in the regulatory and market environment, and to ensure that it remains relevant and effective in protecting consumers.

Key Guidance Take Aways

Firms should ensure that their advertising and marketing materials are clear, fair, and not misleading, and comply with relevant laws and regulations.
Firms should assess the creditworthiness of their customers carefully, taking into account their income, expenses, and other relevant factors, and ensure that they can afford the credit they are being offered.
Firms should provide clear and accurate information about their products and services, including the total cost of credit, any fees or charges, and the risks and benefits of the credit.
Firms should treat customers fairly and transparently throughout the credit lifecycle, including during the sales process, the term of the credit, and in the event of arrears or default.
Firms should have effective systems and controls in place to manage credit risk, including monitoring and managing arrears and default, and ensuring that debt collection practices are fair and proportionate.
Firms should have appropriate governance arrangements in place, including oversight by senior management and effective risk management and compliance functions.
Firms should have a culture of professionalism and ethical conduct, and ensure that their staff are trained and competent to carry out their roles effectively and in accordance with the code.
Firms should have effective complaints handling procedures in place, and ensure that customers have access to independent dispute resolution services where necessary.
Firms should monitor and report breaches of the code, and take appropriate action to address them, including compensating customers where appropriate.

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