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Responsible Lending Policy

1. Policy Statement

The company are committed to ensuring that all credit agreements, repayments schemes and forms of lending are fair, appropriate and suitable for the customer. This policy sets out our aims and objectives for responsible lending and details our obligations under the regulatory system.

Where lending, credit or repayments are agreed upon by the customers, we will endeavour to assess the customer’s financial status using an affordability assessment, ensuring that any repayments are affordable and suitable prior to setting up a contractual agreement or repayment plan, this will include assessing the customer’s creditworthiness.

This policy also provides guidance and rules for our staff, to ensure that they treat customers fairly and only offer products and services that are fit for purpose and suitable. Our customer approach is to ensure that our products and services are fair, clear and transparent and we have strict and robust policies and procedures in place for Treating Customers Fairly and Vulnerable Customers.

Under this policy, we adhere to the FCA regulatory requirements and specifically to those set out in CONC 5.

2. Purpose

The purpose of this policy is to provide clear guidance to our staff and customers regarding our responsible lending policy and objectives and to ensure that the company is complying with the regulatory rules set out in CONC 5 of the FCA handbook.

The company provides staff training on the objectives and aims set out in this policy as well as the FCA requirements on responsible lending, which helps to ensure that any customer enquiring about our products or services is offered a fair, clear and transparent service as well as ensuring that the product is suitable and affordable.

We are committed to providing all customers with a high level of service whilst remaining compliant with the legal, statutory and regulatory requirements. This includes assessing the financial risk to the customer as well as the risk to ourselves as a lender/credit provider, thus ensuring that both our company and the customer have a suitable and viable relationship.

3. Scope

The policy relates to all staff (meaning permanent, fixed term, and temporary staff, any third-party representatives or sub-contractors, agency workers, volunteers, interns and agents engaged with the company in the UK or overseas) within the organisation and has been created to ensure that staff deal with the area that this policy relates to in accordance with legal, regulatory, contractual and business expectations and requirements.

4. What Is Responsible Lending?

Responsible Lending means ensuring that the products is not only suitable and adequate for the customer, but also assessing the customer’s affordability and creditworthiness prior to setting up an agreement, making sure that provision of the product/service does not put the customer at any financial risk.

The FCA have dedicated CONC 5 and MCOB 11 of the FCA handbook to responsible lending and advise that assessments must be carried out prior to a contractual agreement being set up. These assessments must investigate and analyse the customers’ current financial obligations and creditworthiness, as well as assessing their current income and expenditure to gain an understanding of their disposable income and therefore their ability to repay any loan, mortgage or credit.

5. Core Requirements

5.1 General Conduct

The company confirm that we provide the key features of our regulated credit agreements to the customer in a verbal and/or written format to ensure that they have understood the content and can make an informed choice as required.

Where our lending involves using of a credit broker service, we follow our Outsourcing & Supplier Procedures and use both a Due Diligence Checklist and an Introducer Agreement to ensure that all brokers used are authorised, suitable, competent and compliant.

5.2 Provision of Credit Card Cheques

The company only provides credit card cheques to a customer who has specifically requested them and on a single occasion in respect of each request made, of which the number provided does not exceed 3.

5.3 Credit References

The company confirms that where any such search has been conducted and the customer is not yet ready to purchase the product, we will leave no evidence of the search on the credit file and where able will use the “quotation search facility”.

5.4 Creditworthiness & Suitability

Prior to the provision of any lending or making of a regulated credit agreement, the company utilise effective and tested controls and processes to assess, review and evidence a customer’s status and financial standing. The customer’s ability to repay, current circumstances and future obligations are considered, and any income is evidenced through document collection and background checks.

6. Business Lending

Where any customer is borrowing for the purposes of a business, we also utilise documents and information about and from the business to make our lending assessment. These include (but are not limited to): –

  • Business Plan and Strategy
  • Accounts, Assets and Financial History
  • Future Financial Obligations
  • Director/Proprietor Searches
  • Credit Check & Companies House Search (where applicable)

7. Objectives

The company has laid out the below objectives and aims which we intend to meet in relation to responsible lending for all customers.

The company will ensure that: –

  • We will carry out an affordability assessment using an assessment calculator and evidence of any income, prior to any contractual agreement or repayment plan being agreed.
  • We will carry out a credit check on all customers (with their consent), prior to any contractual agreement or repayment plan being agreed.
  • We will only provide a loan or credit agreement to customers who are able to afford repayments and who have an acceptable level of creditworthiness.
  • We will determine if a customers’ credit status is adequate to allow for additional lending/credit, by considering: –
    • the type of credit
    • the amount of the credit
    • the cost of the credit
    • the financial position of the customer at the time of seeking the credit
    • the customer’s credit history, including any indications that the customer is experiencing or has experienced financial difficulties
    • the customer’s existing financial commitments including any repayments due in respect of other credit agreements, consumer hire agreements, regulated mortgage contracts, payments for rent, council tax, electricity, gas, telecommunications, water and other major outgoings known to the firm
    • any future financial commitments of the customer
    • any future changes in circumstances which could be reasonably expected to have a significant financial adverse impact on the customer
    • the vulnerability of the customer, in particular where the firm understands the customer has some form of mental capacity limitation or reasonably suspects this to be so because the customer displays indications of some form of mental capacity limitation (see our Vulnerable Customer’s Policy).
  • We will always support any affordability assessment by obtaining evidence of any significant income and expenditure amounts.
  • When carrying out an affordability assessment, we will ensure that any repayment amounts are taking into consideration alongside the customers’ existing financial commitment and that our additional repayment amount does not put a financial strain on the customer.

8. Assessment Measures

The company have document responsible lending procedures in place and undertake strict processes for ensuring the suitability and creditworthiness of each customer prior to entering into any agreement or contract. Such measures include using our Affordability Assessment Calculator to record existing income and expenditure obligations and to obtain a clear disposable income figure prior to any offer.

We also utilise external searches for background and credit checks, including [CreditSafe/Experian/Equifax*] and retain copies of any records for 6 years after the agreement has ceased. Such searches and affordability reassessments are carried out on an annual basis for the life of the agreement duration to ensure contained suitability and affordability and to protect the customer.

[If your existing lending assessment processes differ from the above, please amend to suit your business requirements. You should also either include your exact lending procedures in this document or insert the location of the procedures.]

9. Mortgage & Home Finance Objectives

[Delete if not applicable to your business type. If applicable, please ensure that you customise this section to include any obligations your firm has under MCOB 11.]

The company as a lenders and provider under regulated mortgage contracts and home purchase plans, ensure the assessment of affordability for every customer prior to entering into any contract. We have robust controls and measures in place to ensure that: –

  • Before entering into, or agreeing to vary, a regulated mortgage contract or home purchase plan, we always assess whether the customer (and any guarantor of the customer’s obligations under the regulated mortgage contract or home purchase plan) will be able to pay the sums due
  • All assessments and searches are recorded to enable us to demonstrate that any new or varied regulated mortgage contract or home purchase plan is affordable for the customer
  • Any assessment of affordability is never based on the equity in the property which is being used as security under the regulated mortgage contract or is subject to the home purchase plan
  • All affordability assessments take full account of: –
    • the income of the customer, net of income tax and national insurance
    • as a minimum, the customer’s committed expenditure and the basic essential expenditure and basic quality-of-living costs of the customer’s household
  • When acting in the provision of a mortgage lender, we always assess affordability on the basis of both repayment of capital and payment of interest over the term and consider the impact of likely future interest rate increases on such assessed affordability

All affordability assessments are backed-up by evidence and reviewed in accordance with the FCA’s regulatory requirements. the company never rely on a general declaration of affordability by the customer or their representative.

10. Responsibilities

The company will ensure that all staff are provided with the time, training and support to learn, understand and implement the Responsible Lending Policy and subsequent procedures. Management are responsible for a top down approach and in ensuring that all staff are included and have the support needed to meet the regulatory requirements in this area.