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.