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Government Announces Practical Amendments to the Credit Contracts and Consumer Finance Act

Written by Lois McLintock

In December 2019, the Government’s amendments to the Credit Contracts and Consumer Finance Act 2003 were implemented. These changes required lenders to follow a more robust investigation process to ensure any potential lending would be suitable and affordable for prospective borrowers.  The intention of this was to protect those borrowers who may find themselves taking out high-cost loans and creating unaffordable debt.

Following ongoing feedback from banks, other lenders, and consumers, that a number of  borrowers that would otherwise have received funding were now being declined, the government has announced some practical amendments to the responsible lending rules which should mitigate any unintended consequences of the legislation.  These amendments aim to protect those most vulnerable from unaffordable lending whilst ensuring borrowing is still accessible to those who can afford it.

The government have confirmed that there is no need for lenders to inquire into borrowers’ current living expenses from recent bank transactions and have removed regular savings and investments being defined as expenses. Further, the government has provided clarification on the requirement for lenders to obtain information in sufficient detail.  Lenders are now able to rely on the information borrowers provide directly to lenders instead of lender’s obtaining information from bank transaction records. In addition, further guidance has been provided on when it is ‘obvious’ that a loan is affordable.  These changes should come into effect from June 2022.

Investigations into the Responsible Lending Code and credit laws are ongoing, with recommendations for any additional changes to credit laws due in April 2022.