The FCA's rules on responsible lending

The FCA's rules on responsible lending are set out in CONC 5 and draws upon the “Irresponsible Lending Guidance” which was originally published by the OFT in 2010 (and updated in 2011).

Before entering into a credit agreement with a customer, a lender must assess the customer's creditworthiness (including affordability) – not just the risk to itself in providing the credit to the customer.  This assessment must include considering the customer's financial wellbeing - that is, the potential for the commitments under the credit agreement to have an adverse impact on the customer's financial situation.

The assessment is intended to determine the customer's ability to make repayments as they fall due over the life of the credit agreement.  It must be based on sufficient information, which may be obtained from the customer, where appropriate, and from a credit reference agency, to establish the customer's credit history.