The Finance and Leasing Association (FLA) has updated its
Lending Code, replacing the 2006 version. The Code covers all
consumer credit loans and consumer hire or lease agreements that
have been taken out with FLA members on or after 1 February 2012,
and sets out standards of good practice with the aim of ensuring
customers feel comfortable when buying from any of the fifty full
members of the FLA. The latest edition of the Code includes
increased protection for vulnerable borrowers in financial
difficulty. This is in line with the Office of Fair Trading's
latest guidance on debt collection which it considers to be a high
risk sector of the consumer credit market.
In response to the rise of the pay-day lender the Code contains
a new section dedicated to short term lending. This section obliges
FLA members to be completely transparent on the overall cost of a
short term loan by clearly documenting any fees and charges, along
with the annual percentage rate, from the outset. In addition FLA
members will remind customers that short term loans are not
suitable for long term borrowing. This point is reinforced by not
permitting a customer to extend the term of his or her loan on more
than three occasions.
The Code also implements Government measures that were agreed
with the store card industry and announced in November 2011
following their consumer credit and personal insolvency review. The
new provisions include a ban on direct commission to sales staff
and a seven day ban on retail incentives when a customer takes out
a store card.
Consumer credit is a complex area of law and this Code is not
the only matter that needs to be taken into account. For example,
there are also the Consumer Credit Act 1974 and the Financial
Services and Markets Act 2000, as well as other regulations.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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