Pre Contract Information

(19/03/25)

Pre-contract information

Members must be given a prescribed Pre-contract Credit Information (PCI) form ‘in good time’ before entering into a credit agreement. The prospective borrower must be able to take this information away, consider it and be able to shop around on the basis of the information it provides.

This is a requirement of The Consumer Credit (Disclosure of Information) Regulations 2010 – which arise from the EU Consumer Credit Directive

Important points to note are:

• The regulations do not apply to credit secured on land; credit that exceeds £60,260; or credit extended for business purposes.
• Information must be made available to the borrower “in good time” and they must be allowed the opportunity to take the information away, consider it and to compare it with other equivalent standardised information where they wish to. This does not, however, prevent this stage being foregone in circumstances where the borrower is happy to proceed as long as they have been informed of their right to consider the information.The information required to be disclosed is largely the same as that required to be included in a credit agreement with the addition of:
  – you must inform the borrower where the rejection of an application is based on credit referencing information and the nature of that information; and
  – the borrower has the right to request a copy of a draft credit agreement; the period of time for which you are bound by the supplied pre-contract information.
• The information must be provided in the format prescribed in Schedule 1 of the regulations (sometimes known as the Standards European Consumer Credit Information form or SECCI) using the same headings and sub-headings.
• The information must be clear and easily-legible and in the form of a removable document which the borrower can take away with them.
• The details of any credit intermediary involved in the transaction must be included where the creditor can reasonably be expected to have knowledge of any intermediary.
• Any additional information provided must be provided on a separate document to the PCI.
• Where a credit agreement is in “parts” it is not necessary to provide a separate PCI disclosure for each part.
• Where a “modifying agreement” is issued to alter the terms of the original agreement it is not necessary to re-issue the PCI provided that any information which varies or supplements the original agreement is disclosed in good time; and, the creditor informs the borrower that all other information remains the same in writing and in good time before the modifying agreement is entered into.

Template PCI is available to donwload from the right hand side of this page.

Full details of the information that must be included in the PCI are available in Schedule 1 of the regulations, here: http://www.legislation.gov.uk/uksi/2010/1013/schedule/1/made.

A full summary of the regulations can be found in Chapter 9 of the Department for Business, Innovation and Skills guide to implementing the requirements (the BIS guide) arising from the EU Consumer Credit Directive, here: http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/c/10-1053-consumer-credit-directive-guidance.pdf.

Distance marketing and sales

Loans agreed and disbursed remotely are subject to the EU Distance Marketing.

Information on the Distance Marketing Directive is available separately on the ABCUL website.

Adequate explanations

The Consumer Credit (EU Directive) Regulations introduced a new section into the Consumer Credit Act – section 55A – subsequently transferred into the FCA’s Consumer Credit Sourcebook (CONC) which requires creditors to provide “adequate explanations” of the credit product prior to the conclusion of the contract. Information required here includes:

• any features of the credit which may make it unsuitable for particular types of use. Refers, for example, to a loan that is not suitable for longer-term borrowing such as pay day lending.
• how much the borrower will pay periodically and in total
• features which may have a significant adverse effect in a way that the borrower is unlikely to foresee. This could be explaining complex features which, if misunderstood, could result in the customer paying too much or suffering in some other way.
• the principal consequences of failure to make repayments, including legal proceedings and repossession where applicable
• the right of withdrawal and how/when this can be exercised.

A template script for an oral adequate explanation is available to download on the right hand side of the page.

Chapter 8 of the BIS Guide provides a summary of what is expected here: http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/c/10-1053-consumer-credit-directive-guidance.pdf

Other points to consider:

• The format of this information is not prescribed but should be adequate to enable to borrower to assess whether the proposed agreement meets the needs of the borrower and their financial situation.
• The requirement does not impose a requirement on the credit union to determine whether or not the agreement is suitable but should be detailed enough to allow the borrower to be able to do so for themselves.
• The requirement is additional to the general provision that credit union should provide all information that an average borrower would need to make a borrowing decision.
• A borrower cannot waive the right to be given adequate explanations but it is reasonable for the credit union to expect the borrower to recall other comparable explanations that have been given and that they demonstrated that they understood.
• It is not prescribed how this information must be supplied although the credit union should inform the borrower orally to consider the PCI and take it away should they wish to.