Decisions regarding a finance package

It is important that customers are sure they are making the right decision regarding a finance package before they sign a legally binding contract. 

Lenders have always been required to provide the customer with a copy of the agreement.  From 2005, the law was changed so that they also received pre-contract information.  For many credit agreements since 2010/11, the pre-contract information is in the form of a 'Standard European Consumer Credit Information' sheet (called a "SECCI).

Since 2010/11, lenders have been required to provide an adequate explanation with regard to regulated credit agreements (but not for regulated consumer hire agreements).  This is now contained in CONC 4 (here).  CONC requires either the lender or the dealer to:

  • provide the customer with an adequate explanation and assess whether the agreement is adapated to the customer's needs and financial situation;
  • advise the customer;
    • to consider the pre-contract information; and
    • where the information is disclosed in person, that the customer is able to take it away;
  • provide the customer with an opportunity to ask questions about the agreement; and
  • advise the customer how to ask the lender or the dealer for further information and explanation.

In order to be “adequate” the explanations given should be tailored to the customer's ability to understand the proposed agreement: in deciding what level of explanation is appropriate in each case, lenders and brokers should have regard to:

  • the type of credit being sought;
  • the amount of credit to be provided and the associated cost and risk to the customer;
  • the customer's understanding of the explanation provided (insofar as it is possible to judge this); and
  • the channel or medium through which the credit transaction takes place.