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Consumer Credit Compliance for Borrower-Lender-Supplier Agreements

Ordinary borrower-lender lending by credit unions continues to be exempt from the requirement to apply for authorisation. Only where an agreement exists between the lender and the supplier – such as between the credit union and a provider of white goods – is the agreement considered a Borrower-Lender-Supplier agreement and, therefore, is it subject to consumer credit regulation.

Consumer credit regulation and Borrower-Lender-Supplier agreements (formerly Debtor – Creditor – Supplier Agreements)

Why do you need to know?

Ordinarily credit unions are not required to comply with the consumer credit regulation, as two party borrower-lender credit agreements between a credit union and a member are exempt.

However, agreements involving a supplier where credit is extended under arrangements between the credit union and the supplier on the reasonable expectation that the credit will be used to supply goods to the debtor (member) – known as a borrower-lender-supplier agreement – are not exempt from the requirements of consumer credit regulation. An example of these is loans extended under the scheme with Co-operative Electricals.

Credit unions making borrower-lender-supplier credit agreements such as these are required to hold an interim or full permission from the FCA and all such loans must be compliant with the requirements of the consumer credit regulations (found in CONC).

These loans if deemed non-compliant could be unenforceable and therefore might have to be written off should they be challenged by the member making it of the highest importance that they are properly administered. This guidance aims to outline the main points of the regulations relevant to credit unions and what you must do to comply.

Remember – credit unions which only conduct lending under borrower-lender agreements (loans directly to members) are not required to comply with these regulations. However it is good practice to adhere as closely as possible to the requirements as doing so strengthens the position of the exemption.

Click the relevant link below for information on:

• Applying for FCA authorisation
• Pre contract information
• Credit agreements
• Post contract information
• Early settlement
• Equal liability
• Related information:
  • Debt collection
  • Credit advertising
  • Irresponsible lending
  • Charging orders
  • Mental capacity
  • Unenforceable agreements
  • Further information

Wednesday 10 January 2024