Further, as per and in accordance with CONC, the extent and scope of any assessment must be proportionate to the individual circumstances of the customer, including the type and amount of credit and basis for repayment.
In the vast majority of cases it may be appropriate for additional information to be obtained for verification purposes.
This may include, for example, obtaining further data from an independent source in relation to income, such as looking at the recent history/circumstances of a customer, which may make them particularly vulnerable.
Whilst it may not always be possible to foresee an event rendering a loan unaffordable (such as a loss of income), the Letters state that the FCA expects firms to eliminate lending that is predictably unaffordable, mitigating the risk of financial distress.
The FCA is particularly sensitive to repeat borrowing, which creates a dependency on HCSTC which is not sustainable, but detrimental to customers.
Complaints handling: The FOS
So far as complaints handling is concerned, the FCA expects firms to analyse the root causes of complaints, treat customers fairly and take into account the FOS’ decisions where relevant.
While customers are able to complain to a firm directly (and firms are required to record and report such complaints to the FCA in accordance with reporting obligations), complaints may also be made to the FOS.
When assessing whether or not a HCSTC firm has provided credit irresponsibly, the FOS will consider whether the firm did everything that was required and if not, whether the customer has suffered loss as a result.
The FOS will also carry out an assessment in order to determine:
- whether the firm completed reasonable and proportionate checks, satisfying itself that the customer would be able to repay in a sustainable way;
- if reasonable and proportionate checks were carried out, whether a fair lending decision was made; and
- whether, depending on the circumstances, at the time of each application and/or increase in credit, there was a point at which the HCSTC firm ought reasonably to have realised it was increasing the customer’s indebtedness in a way that would be either unsustainable or otherwise harmful and as a result, shouldn’t have provided credit.
While the FOS will consider the relevant rules and guidance, it will also consider whether the lending provided to a customer is sustainable.
By this, can the customer repay the credit without undue financial difficulty, ensuring they are able to meet other commitments without having to borrow further?
