Responsible lending is acting in the best interests of the customer, ensuring transparency in its terms and conditions, customer affordability and assisting a borrower if they experience repayment and debt difficulties.
Lenders then, have a duty to ensure borrowers grasp loan details and perform a thorough analysis, so lenders can be sure what credit agreement customers obtain through them are suitable for their circumstances.
Customer affordability is key to responsible lending
A priority for the Financial Conduct Authority (FCA) is ensuring that customer affordability is key to responsible lending.
FCA guidance states that critical to responsible lending is a borrower’s ability to not only repay a loan, but that the additional credit will not get that customer into debt.
Plus, lenders must consider customer income in deciding whether to offer the borrower a credit contract.
Transparency and responsible lending in the payday loan market
The payday loan industry has made great strides in assisting borrowers in getting the most out of their payday loans. This is due to payday loan companies demonstrating better transparency by clearly showing to borrowers how much they will borrow and what they will repay.
Potential borrowers now have easier-to-read detailed information, supported by explanatory financial resources, thus ensuring they can manage their finances appropriately. Furthermore, payday loan lenders must provide additional information and support for customers who are in financially challenging circumstances.
What does responsible lending entail?
Responsible lending legitimises the payday loan industry by providing better consumer protection. Responsible lending requires a level of mutual understanding and practice between creditor and borrower.
Before entering into a loan contract, lenders must:
- Guarantee that the loan product and terms meet a borrower’s need.
- Make sure that the borrower will be able to make good on the agreed-upon loan payments without suffering financial hardship in doing so.
- Not coercing the borrower into accepting any credit agreement.
- Help borrowers make informed decisions.
- Not mislead or deceive the borrower with jargon or vague contract language meant to obscure terms.
- Act with high ethical standards when and if the borrower encounters unforeseen hardship or a breach of contract of any sort.
Before entering into a loan contract, borrower’s must:
- Ask themselves, do they really need a short-term loan?
- Repay the loan in full.
- Ensure the loan aids them in removing themselves from further debt.
- Ensure they have a good credit history.
- Be responsible with money.
How lenders implement responsible lending
To protect our customers, Peachy assess each application on an individual basis to ensure that applicants can afford the loan before it is approved.
Peachy wish to be sure that we are not putting our customers in a difficult financial situation.
Credit checks and credit history
As a responsible lender, Peachy conduct a full credit search if applicants meet our lending criteria. By running your application through a credit check ensures that Peachy fully understand if applicants have had concerns repaying a debt in the past.
The outcome of this check will impact our assessment of offering a loan to potential borrowers.
Non-Payment and Financial Implications
Borrowers must be able to repay their loan as per the terms of their credit agreement. Failing to do so could result in serious financial implications.
Peachy will attempt to automatically collect your loan on a daily basis, in parts if necessary until the debt has been fully repaid.
Secondly, if a customer defaults on a loan, Peachy will notify a credit agency meaning that customers may find it difficult to obtain credit in the future.
Interest will continue to accrue on the credit customers have borrowed and will continue to receive late payment fees according to the terms of their credit agreement with Peachy.
Lastly, and only as a matter of last resort, Peachy will refer your case to a debt collection partner.
Peachy lend short-term loans to customers based on an assessment of their application, ensuring they can afford to repay their loan. Thus, Peachy expect full repayment as per the due date of the loan.
If our customers have any problems in paying back their loans, it is important that they contact us immediately, and preferably in advance and before the loan repayment date.
Peachy promise our customers that we will be:
- We will be fair to you. We understand circumstances change and will offer customers alternative payment options.
- We will take particular care if a customer is suffering from health problems, especially mental health difficulties when we are provided with documentary evidence. Peachy may request your permission to record this information within our system.
Renewal (Extension) Policy information
Peachy wish to support every customer should they experience financial difficulties. As part of responsible lending Peachy permits our customers to apply for up to two loan extensions.
All loan extension applications are at the sole discretion of Peachy and will be considered as part of our responsible lending criteria. Customers who cannot repay their loan should not apply for an extension – extensions are only for those who experience a change in financial circumstances.
Customers extending their loan will see an increase in the total cost of their borrowing.
Customers can apply for a loan extension either through the ‘my account’ area or by sending an SMS text message saying “EXTEND” to 68899. To receive a loan extension, customers will need to pay any outstanding interest and fees of their current loan.
Debt support for customers
Responsible lending includes providing evidence of where borrowers can find help with debt caused by their lender. Peachy recommends the following organisations to assist our customers should they have financial difficulties, whether caused by a Peachy loan or other personal circumstances: