Consumer credit agreements—pre-contract requirements
Produced in partnership with Jacqui Hatfield of Orrick Herrington & Sutcliffe UK LLP
Consumer credit agreements—pre-contract requirements

The following Financial Services guidance note Produced in partnership with Jacqui Hatfield of Orrick Herrington & Sutcliffe UK LLP provides comprehensive and up to date legal information covering:

  • Consumer credit agreements—pre-contract requirements
  • Consumer credit pre-contract requirements
  • What is the relevant consumer credit pre-contract law?
  • Which kinds of agreement do the Disclosure Regulations apply to?
  • What are the general requirements?
  • Are there any exceptions to the general requirements?
  • When must the information be provided to the prospective borrower?
  • What are the specific requirements for certain types of consumer credit agreement?
  • How does the disclosure of pre-contract information need to be made to the consumer?
  • What are the consequences of failing to comply with the Disclosure Regulations?
  • more

Consumer credit pre-contract requirements

In its Consultation Paper entitled 'Detailed proposals for the FCA regime for consumer credit (CP13/10), the Financial Conduct Authority (FCA) emphasised that one of the main principles underpinning the consumer credit rules is to ensure that consumers are treated fairly while still being responsible for their own decisions.

The practical application of this principle is encapsulated by the consumer credit rules relating to pre-contractual disclosure (CONC 4). By requiring a lender to disclose pre-contract information, adequate explanations and other risk warnings to the borrower ‘in good time’ before they decide to enter into a credit agreement, the borrower can make an informed decision about entering into the credit agreement. For information on post contract requirements, see Practice Note: Consumer credit agreements—post-contract requirements.

The rules in CONC 4 are largely prescriptive in nature, with general rules (CONC 4.2) applicable to all regulated consumer credit agreements, and further specific rules for particular categories of consumer credit agreement ie credit brokers (CONC 4.4) and peer-to-peer lending (CONC 4.3).

If the requirements relating to pre-contractual disclosure are not followed by the lender, the agreement may be unenforceable without a court order and the lender may have breached their regulatory duties. The latter should be in the forefront of firms’ minds, because the FCA are unlikely to shy away from utilising their enforcement