Loans in the UK: How the Consumer Credit Trade Association Protects Ordinary Borrowers

The Consumer Credit Trade Association is a private organization based in the United Kingdom and dedicated to creating fair standards for businesses that loan money. Businesses include mortgage lenders, home credit lenders, payday loan businesses, and banks. It is a not-for-profit trade association run by representatives of its members, and much of its work relates to lobbying. However, though it is primarily exists to assist lender institutions, it also attempts to create standards that protect consumers.

Lenders that are members of the Consumer Credit Trade Association typically advertise this fact on their website and in promotional literature. This communicates to prospective borrowers that the lender has agreed to abide by the standards of the Association, providing a measure of security. (See http://www.ccta.co.uk/Article.aspx?id=459)

The Association monitors its members to ensure that they comply with its regulations. All violations are recorded and made available to the government. The Association has the right to make unscheduled compliance audits, give written warnings to the member, and request a written explanation of any poor conduct. Any member that learns of a violation by any other member must report it. In this way, the Association polices its own members. Members can be expelled from the organization for failure to comply. This strict enforcement is part of the reason that many people prefer to borrow money from lenders that are members of the Association.

Joining the Association entails agreeing to a set of general guidelines designed to protect consumers. Members agree to obey the law and behave ethically, and to ensure that other members of the Association do likewise. Members agree not to misrepresent facts to a consumer and to protect a consumers confidential information. They agree to train their staff and to comply with requests posed by governmental authorities. They also agree to provide an Industry Borrower Information Sheet upon request to any prospective borrower.

The Association also requires that its members abide by its standards in advertising and marketing. Members agree to market their services responsibly and honestly. They are required to comply with relevant regulations governing advertising such as the Radio Advertising Standards Code, and the Consumer Credit Act of 1974. The Association explicitly states that its regulations govern advertising online, just as they do other advertising mediums.

Lenders who join the Association are bound to take certain precautionary measures when making loans with balloon payments available to customers. A balloon payment is a large payment made at the end of a loan that exists to pay off any remaining balance owed to the lender. Association members agree only to make balloon payments available where the customer proposes to enter into the agreement for business purposes. Even when this is the case, the lender must carefully explain the features of the option and even try to ensure that the customer will be able to pay the loan.

As a general matter, Association members are generally expected to ensure that those who borrow money can afford to do so. The Association also requires that members make a reasonable effort to educate young people from the ages of 18-21 years about the responsibilities that attend to taking out a loan.

In the event a customer experiences financial difficulties, Association members agree to establish procedures treat these customers “sympathetically and positively,” and make special allowances for those with diminished mental capacity. Per Association rules, struggling customers are to be referred to debt counseling associations. Debt enforcement is also regulated, and members must annually review their debt collection practices.

Of course, membership in the Consumer Credit Trade Association does not guarantee ethical behavior. Some lenders, such as payday loan businesses, have come under fire for charging very high interest rates. Others have been charged with unethical behavior. However, while Association membership does not absolutely ensure that members behave perfectly, it is widely thought to improve the chances that a lender will abide the Associations high standards.

For all these reasons and more, borrowers should strongly consider borrowing from lenders that are members of the Consumer Credit Trade Association. Though no panacea, the Association does help to improve the lender-borrower relationship by protecting both banks and borrowers.

Sam, the author, has been looking into loans UK to try and understand the various options more fully.

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