The Office of Fair Trading (OFT) has published guidance for consumer credit businesses which are considering granting credit to borrowers understood to have, or suspected of having, some form of mental capacity limitation that might constrain their ability to make an informed borrowing decision. The guidance sets out the general approach when considering applications for credit from, or making offers of credit to, such borrowers.

Published on 28 September 2011, the guidance is designed to provide greater clarity for consumer credit businesses as to practices that it considers may be unfair or improper for the purposes of section 25(2A)(e) of the Consumer Credit Act 1974 (CCA).

The guidance focuses mainly on the adoption of appropriate practices and procedures to assist such borrowers. These include:

  • Providing borrowers with clear information and explanations about credit agreements and any associated risks.
  • Giving borrowers adequate time to weigh up the information and explanations provided, in order to better enable them to reach responsible borrowing decisions.
  • Carrying out sufficiently stringent assessments of their ability to afford to meet repayments in a sustainable manner.

The guidance also updates and amends (for consistency) relevant aspects of the OFT's irresponsible lending guidance.