The FCA announced in its Business Plan 2015/2016 an intention to undertake wide-ranging research with a view to consulting on possible changes to its rules on creditworthiness to clarify its expectations of firms.  Ahead of this, the FCA decided to address some of the common misunderstandings that it encounters. On 26 June 2015, the FCA published two documents addressing some of these common misconceptions.

Consumer credit permissions

The FCA clarified that:

  • for lenders, not all types of instalment credit are exempt.
  • for brokers, only dealing with exempt agreements does not mean that credit brokering permission is not required.

For the full document and additional clarifications, please click here

Creditworthiness and affordability

The FCA clarified that:

  • the FCA rules do not prescribe how lenders should check creditworthiness, the FCA takes a principle-based and outcomes-focused approach and gives the lender discretion as to how to make a reasonable assessment.
  • brokers are not required to assess affordability but where a credit broker is providing advice or a recommendation to a borrower, it should have due regard to whether the product is affordable.

For the full document and additional clarifications, please click here.