Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if she will take steps to ensure that people entering into financial commitments are provided with adequate information on the (a) contract and (b) impact of borrowing.

The Financial Conduct Authority (FCA) is responsible for regulating the consumer credit market. It is part of a robust regulatory system which is driving the Government’s vision for a well-functioning and sustainable consumer credit market that meets consumers’ needs.

Prior to entering into an agreement, a firm must provide a consumer with a range of information, allowing them to compare the features of different credit products, and to ensure they understand the key terms of the agreement they are entering into. This includes Adequate Explanations required by FCA rules, as well as Pre-Contractual Credit Information set out in the Consumer Credit Act 1974.

Lenders are also required to adhere to rules and guidelines set out in the FCA’s Consumer Credit Sourcebook (CONC) on responsible lending. These rules are based on the principle that money should only be lent in circumstances where it is affordable and appropriate for the consumers’ needs. Such rules mandate firms to undertake affordability and creditworthiness assessments against consumers to assess their ability to repay the credit without causing financial difficulty.

You may also be interested to know that the Government is committed to reforming the Consumer Credit Act 1974 to make it fit for purpose and bolster consumer protection. As part of this, the Government will consider how to ensure consumers are better informed about the costs and conditions of credit products and can make informed decisions. The government will be publishing proposals in due course.