Responsible lending involves a combination of compliance with legal requirements and business practices developed to regulate access to credit for private customers. There is no agreed definition of the concept but the following are examples of best practice many lenders today fulfil:
• Using unambiguous language to complying with regulations on misleading advertising and, actively seeking to remove small print and jargon.
• When assessing credit applications, examining the overall likelihood of the applicant being (or close to being) over-committed.
• Looking at ways to work with industry colleagues, Government, Regulators and Consumer Groups to promote consumer education and financial awareness – also by helping consumers to understand the reasons for a credit application being declined.
• Together with credit bureaux (see note 1), where appropriate, considering ways of identifying possible over-commitment at the earliest opportunity. This is in the interest both of the lender and the customer.
• Actively supporting and promoting awareness of free money advice organisations (see note 2)that can support customers in difficulty.
• Regularly reviewing their end-to-end processes, making changes to practices where necessary and preparing internal guidance to promote staff education
• Going beyond simple compliance and seeking ways to promote tangible benefits from adopting/extending responsible lending practices
• Examining ways to increase data sharing, including positive data, within the existing data protection provisions - “enabling fully informed decisions”
• Within the tradition of the market place developing robust and meaningful Codes of Practice.