The new provisions from the Consumer Credit Directive include:
- a duty on the lender to provide standardised explanations about the credit on offer to the consumer;
- an obligation on the lender to check creditworthiness before offering or increasing credit;
- further requirements concerning information from credit reference databases if they form part of a lender’s refusal for credit;
- a right for consumers to withdraw from a credit agreement within 14 days, without giving any reason;
- requirements to inform consumers when debts under a consumer credit agreement are sold on;
- requirements on credit intermediaries to disclose fees and links to creditors; and
- a right to make partial early repayments of loans
Additional information from the Office of Fair Trading:
The new right to withdraw, unlike previous rights of cancellation, applies to all credit agreements with only some limited exceptions (for example mortgages).
Previously there was a limited right to cancel a credit agreement under Section 67 (Consumer Credit Act) - but only where the agreement was signed off trade premises following oral representations in the consumer's presence. For example, a home credit loan which was negotiated and signed in the borrower's home. It did not apply where the agreement was signed on trade premises.
From an OFT perspective, we expand on some relevant issues in our recent Irresponsible Lending Guidance. In particular, Chapter Three of the Guidance sets out our position on the need to provide an adequate explanation of key features of the credit agreement - please see this link.