The trend of acquiring loans to meet your growing financial needs has become more common today than it has ever been before. This need has in turn, seen the rise of several different loan providers. In order to keep the loaning activity safe and up to the par, the United Kingdom has regulated an entire section where the loan providers are bound to adhere to certain legal responsibilities.
Legal Responsibilities of Loan Providers
There is a long list of legal responsibilities that fall under ‘The Lending Code’ and are required to be fulfilled by the provider. This code has set the standard for lenders in the United Kingdom in order to make the practice prolific for the industry, the borrowers, and the lender itself. Following are a few of these responsibilities:
- The loan providers must make sure that their policies and promotional literature is clear and fair. It must not mislead the borrower in any way.
- The provider must make sure that it lends the money responsibly. There should not be any errors or delays on its part. Furthermore, the lender must also make sure that the money is lent to the borrower on time.
- No changes in interest rates will be made prior to informing the customers. This also goes for a change in terms and conditions, as well as for different charges.
- Any information of the borrower that is personal must be treated as so. Loan providers are required to take adequate measure to protect such information.
- The loan provider must make sure not to use legal or technical terminology where it isn’t required. The language in the presented information to the buyer should be kept plain and simple.
- The borrower must be given the option to opt out of receiving marketing information from the lender. In addition to that, any promotional unsolicited email to the borrower must include the option to unsubscribe for future emails of such regard.
- For the borrowers that are buying a credit product, the lenders must tell them if the Credit Reference Agencies (CRAs) will perform any checks or searches on them. The borrowers must also be informed if the record of that particular check will be kept at the CRA. However, the lender has the right to provide customer’s default information to the CRA in the following cases:
- The borrower has not been following the schedule of payment
- The borrowers’ proposal of repayment schedule is not satisfying enough to the lender
- Upon asking, the lenders are obliged to tell borrowers about the CRA they use. Borrowers must also be advised on how they can get a copy of their information being held by CRA.
The Lending Code covers several different areas that are related to credit cards, charge cards, loans, debt collection activities, and current account overdrafts. It defines the minimum standards for having a good practice while lending to micro-enterprises, consumers, and charities that have a below 1 million pound annual income.