FLA rewrites borrower protection

The code has been updated to take account of recent changes in statutory regulation, including the new Consumer Credit Directive and the latest Office of Fair Trading Guidance.

New elements include:

• additional measures to help customers in financial difficulty and in particular those with mental health problems;

• A ban on commission payments for shop staff selling store cards, and a delay in discounts or other benefits for the first seven days after a store card is acquired;

• A requirement on lenders to ensure customers are aware of the total cost of a short-term loan (including fees and charges) before they apply, and that the loan is not suitable for long-term borrowing;

• A restriction on the number of times a short-term loan can be extended to a maximum of three, coupled with a requirement that a new credit assessment be carried out each time.

Fiona Hoyle, head of consumer finance at the FLA, said: “The FLA lending code has been providing additional protection for credit customers for over twenty years.

“The new measures for store card sales and short-term loans reinforce the commitment of all FLA members to responsible lending."

The Code is binding on all fifty FLA members in the consumer credit markets, and is subject to independent oversight. It includes a customer complaint service.

Last year FLA members provided £73 billion of new finance to UK businesses and households. £52 billion of this was in the form of consumer credit, a third of all unsecured lending in the UK.