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Mental capacity guidance for creditors

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Purpose of project

To provide clarity for creditors on mental capacity in the context of responsible lending and borrowing decisions, as to what the OFT requires of them. In addition, the guidance also aims to afford better protection to a particularly vulnerable sub-set of consumers from unsustainable borrowing, whilst also ensuring that they are not inappropriately denied credit.

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Current status - 19 March 2012

Download the Summary of responses to the consultation on 'Mental Capacity - OFT guidance for creditors' (pdf 360kb)

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Background to project

During the consultation on the Irresponsible Lending guidance creditors sought clarity on how they might identify and deal with borrowers who are understood to have, or suspected of having, some form of mental capacity limitation that might constrain their ability to make an informed borrowing decision.

Until this project little attention had been focused on dealing with such issues at the lending decision stage; instead the emphasis has tended to be on dealing with post-contractual issues - that is once the borrower has got into debt.

The guidance was published on 28 September 2011.

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Key issues

The guidance sets out steps that consumer credit businesses can take with a view to:

  • identifying borrowers who might have mental capacity limitations
  • assisting these customers to be able to understand explanations of credit agreements to enable them to make informed borrowing decisions
  • reducing the risk of such consumers being granted unaffordable or clearly unsuitable credit.

The guidance focuses primarily on creditors adopting appropriate practices and procedures to assist borrowers who might not have the mental capacity to make informed decisions. These include:

  • Providing borrowers with clear information and explanations about credit agreements and any associated risks.
  • Giving them adequate time to weigh up the information and explanations provided in order to better enable them to reach responsible lending decisions.
  • Carrying out sufficiently stringent assessments of their ability to afford to meet repayments in a sustainable manner.

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Relevant documents

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If you would like to contribute please contact Debbie Samosa (, 020 7211 8141) or Denise Ellis (, 020 7211 8333).

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