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 requiring pre-contract information to be provided also. For many credit agreements since 2010/11, the pre-contract information has been issued in the form of a ‘Standard European Consumer Credit Information’ sheet (called a SECCI). But in preparation for the UK to leave the European Union new regulations came into force on 30 December 2020 requiring references to the ‘SECCI’ to be removed by 30 May 2021.
Lenders must continue providing pre-contract information and adequate explanations to customers with regards to regulated credit agreements (but not for regulated consumer hire agreements). This is contained within 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 adapted 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.