Extracts from the CONC rules regarding secured lending

The following extracts are taken from the Consumer Credit Sourcebook.

I am listing these as background information for people considering complaining about having to agree to a secured loan at the end of an IVA. This is not a complete set of the CONC rules relating to secured lending

CONC 5.2.2 R
(1) Before entering into a regulated credit agreement which is excluded from CONC 5.2.1 R (see (4), (5) and (6)), a firm must carry out an assessment of the potential for the commitments under the agreement to adversely impact the customer’s financial situation, taking into account the information of which the firm is aware at the time the agreement is to be made.
(3) A firm must consider sufficient information to enable it to make a reasonable creditworthiness assessment or a reasonable assessment required by (1).

CONC 5.2.3
The extent and scope of the creditworthiness assessment or the assessment required by CONC 5.2.2 R (1), in a given case, should be dependent upon and proportionate to factors which may include one or more of the following:

(1) the type of credit;

(2) the amount of the credit;

(3) the cost of the credit;

(4) the financial position of the customer at the time of seeking the credit;

(5) the customer’s credit history, including any indications that the customer is experiencing or has experienced financial difficulties;

(6) the customer’s existing financial commitments including any repayments due in respect of other credit agreements, consumer hire agreements, regulated mortgage contracts, payments for rent, council tax, electricity, gas, telecommunications, water and other major outgoings known to the firm;

(7) any future financial commitments of the customer;

(8) any future changes in circumstances which could be reasonably expected to have a significant financial adverse impact on the customer;

(9) the vulnerability of the customer, in particular where the firm understands the customer has some form of mental capacity limitation or reasonably suspects this to be so because the customer displays indications of some form of mental capacity limitation (see CONC 2.10).

CONC 5.2.4

(1) To consider all of the factors set out in CONC 5.2.3 G in all cases is likely to be disproportionate.

(4) A high level of scrutiny in the assessment required by CONC 5.2.2 R (1) would normally be expected before the lender enters into a regulated credit agreement secured by a second or subsequent charge on the customer’s home.

CONC 15.1.9
Before a regulated credit agreement secured on land is entered into:
(1) the firm should consider the adequate explanations it should give to the customer under CONC 4.2; and
(2) the firm is required under CONC 5.2.2 R (1) to assess the potential for commitments under the agreement to adversely impact the customer’s financial situation.

CONC 15.1.10
In accordance with PRIN 9 (customer: relationships of trust):
(1) a firm must take reasonable steps to ensure the suitability of its advice, which would include acting in the best interests of a customer where the firm makes a recommendation;
(2) if it appears to the firm that entering into a regulated credit agreement secured on land is not in the best interests of the customer, that fact should be made clear to the customer; and
(3) the firm should encourage the customer to consider whether the credit can be afforded, including in the event the customer’s circumstances change, for example, through a change in employment or retirement.

Extracts from the CONC rules regarding secured lending

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