Borrowers under regulated credit agreements benefit from comprehensive protections such as detailed pre-contractual information, a cooling-off period to cancel agreements, the right to early repayment, and safeguarding against unfair practices. The Consumer Credit Act (CCA) and the Financial Conduct Authority (FCA) ensure transparency, fair treatment, and the right to challenge lender decisions. Additionally, disputes can be resolved through the Financial Ombudsman Service (FOS), offering a free and efficient alternative to legal action for consumer redress. Please note, however, that these protections do not apply to unregulated credit agreements, where borrowers may not have the same level of statutory rights and recourse.
For example, as a borrower, you have the right to refer any complaints related to your regulated loan to the Financial Ombudsman Service, which is a free and impartial dispute resolution service.
Another example for regulated loans is that specific rules are in place to ensure that credit risk is underwritten and arrears and defaults are managed in a way that minimises any potential harm to customers. These rules are designed to protect your interests as a borrower and ensure fair treatment throughout the loan agreement.
The specific rules that must be followed in underwriting credit risk and managing arrears and default are governed by the Financial Conduct Authority (FCA) in the UK. Here are some key points:
Underwriting Credit Risk:
Loan underwriting standards and practices vary depending on the institution's territory, portfolio, and risk profile.
Standards must be appropriate for the loan program and the institution’s risk-bearing capacity.
Consideration should be given to the nature and type of credit risk, the loan amount, and the enterprise being financed.
Managing Arrears and Default:
Firms must treat customers in default or arrears difficulties with forbearance and due consideration.
Forbearance options, such as allowing deferment of payment of arrears and accepting token payments, should be considered.
Firms should inform customers in arrears about the availability of free and impartial debt advice and refer them to a not-for-profit debt advice body.
These rules are designed to ensure that credit risk is underwritten and arrears and defaults are managed in a way that minimizes potential harm to customers, as advised by the FCA.