Online news: OFT mental health guidance 29 September 2011

The Office of Fair Trading (OFT) has published guidance on mental health for lenders granting credit to people who may not have the capacity to make informed borrowing decisions.

In its guidance, the OFT stipulates that consumer credit businesses are expected to identify borrowers who might have mental capacity limitations and assist them in understanding credit agreements.

Lenders must also be conscious of reducing the risk that individuals with mental health concerns will be granted unaffordable or clearly unsuitable credit. To this end, lenders must provide borrowers with clear information and explanations about credit agreements and any associated risks, and give them adequate time to weigh up the information to better enable them to reach responsible borrowing decisions.

Stringent assessments of borrower’s ability to afford to meet repayments must also be made.

David Fisher, director of the OFT’s consumer credit group, said: “This is a sensitive area. In producing this guidance, we aim to provide clarity for creditors as to what the OFT expects of them and to afford better protection to a particularly vulnerable group of people, whilst ensuring that they are not inappropriately denied credit. It is important to balance the right of a person to make a decision, with their right to safety and protection when they can’t make decisions to protect themselves.”

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