A lender, also known as a creditor, may be defined as a person or institution that lends money to another person or institution; examples are banks, building societies, credit unions, peer to peer lenders, online lenders and payday loan companies. Just as borrowers (or debtors) have responsibilities to lenders when a credit contract is taken out, so lenders have a responsibility to the people or institutions that borrow money from them.
Responsibilities of Lenders
Lenders of all types of consumer credit based financial products – loans, overdrafts, mortgages and credit cards – have a number of responsibilities towards borrowers due to the legal restrictions placed upon them.
The first is that all lenders have a duty to lend responsibly. This means that when considering whether to grant a request for credit, they have to assess the borrower to check whether they think they would find the debt affordable. If the lender suspects that the borrower may have difficulty repaying the debt, they should not lend to that person or institution. A common method of assessing suitability is by checking the credit rating of the potential debtor, though other measures are often taken into account such as assessing the person’s disposable income.
In addition to this, lenders must take special care when lending to those that may be deemed as ‘vulnerable’. This can include lending to the elderly, those with learning difficulties, those with mental illness and those living under some form of supervised care.
Though lenders must show they have not lent to those who cannot afford the debt, their responsibility to the borrower does not end there. If the borrower gets into genuine financial difficulty while the debt is being paid off, the lender must show that they have made all possible attempts to assist the debtor, and have given them enough time to attempt to meet their obligations before turning to legal action. The assistance they should offer could include more time to make repayments, the acceptance of lower payments for an agreed period, the suspension of payments for an agreed period, an interest holiday (where payments are still made but interest does not accumulate), or the rescheduling of the debt (a greater number of payments have to be made, but the payments are lower). It should be noted that any of these may be offered either singly or in combination. Also, it is likely that the lender might require additional proof of income and/or other outgoings before they agree to extend such assistance to borrower.
Complaining About Poor Treatment from Lenders
If the lender does not offer such assistance, however, the borrower may be able to complain to the Financial Ombudsman about the treatment they have received. If the Financial Ombudsman finds in favour of the debtor, they are likely to order that the lender puts right any problem they have caused by shoddy lending practice.
Help when Dealing with Lenders
When dealing with lenders regarding complaints, it is a good idea to have advice from bodies that work in the area of debt and credit management. Advice on dealing with lenders – and also free debt advice including guidance on general debt management – is available from most of the government-backed agencies and charities that work in this area. It is likely that a complainant will have more success in negotiating with lenders if backed by one of these organisations.