Responsible Lending Code overview


The introduction of the Responsible Lending Code (part of the Credit Contracts and Consumer Finance Act) aims to encourage lenders to act responsibly and increase protection for borrowers without imposing unnecessary compliance costs on lenders who already have decent systems in place.

All lenders must comply with the lender responsibility principles outlined in the Act, including:

  • helping a borrower reach an informed decision about whether to agree to a loan

  • making reasonable enquiries to ensure the borrower can make repayments without suffering substantial hardship

  • treating borrowers and their property reasonably, with respect and in an ethical manner

  • ensuring the terms of the agreement and the exercise of powers by the lender are not oppressive

  • meeting all legal obligations to the borrower

The Code will not be binding, but evidence of compliance with the Code will be viewed as evidence of compliance with the binding lender responsibility principles set out in the Act.

Ultimately the Code will help to ensure that vulnerable people do not fall victim to the predatory practices of loan sharks and the like; as well as having access to transparent and easy to comprehend information when taking on debt.

Commerce and Consumer Affairs Minister Paul Goldsmith explained; “Achieving the right balance between consumer protection and industry flexibility is a difficult balancing act. I will be listening carefully to feedback from all interested groups. I intend to issue a final Code in March 2015 to give lenders time to adjust their processes, if needed, before the Code comes into force in June 2015.”

If you would like more information on how the Responsible Lending Code might affect you or your business, please contact our specialist Banking Team or email Tracey Wills

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