Information, Advice and Conduct-of-Business Duties Towards Consumers
Pre-contractual information
Before a consumer is bound, the intermediary must provide clear, fair and not misleading information: the identity and registration details of the intermediary and the lender, a description of the credit type, the total amount, the term, the APR, the total cost, the instalments, the consequences of late payment, the right of withdrawal, and the right to early repayment. Standardised European information formats (the SECCI-style form) exist precisely so that consumers can compare offers. The information must be given in good time and on paper or another durable medium.
Advice and suitability
Where advice is given, the intermediary must gather enough information about the consumer's financial situation, needs and objectives, and recommend a product that is suitable. A credit that is affordable at origination but unsustainable given the consumer's income is not suitable. The conduct rules also require a creditworthiness assessment by the lender, and the intermediary must supply accurate data for it; encouraging a consumer to overstate income is a serious breach.
Conduct-of-business obligations
Key duties include: acting honestly and professionally; avoiding conflicts of interest or disclosing them; explaining the product in an understandable way; providing a copy of the agreement; handling complaints through a documented procedure and informing the consumer about the FSMA and the ombudsman service for consumer credit; and respecting advertising rules. Remuneration structures must not incentivise unsuitable sales.
Traps
A frequent trap is treating disclosure as a substitute for suitability - giving the APR does not discharge the advice duty. Another is confusing the ombudsman schemes: consumer credit disputes go to the consumer credit ombudsman, not the banking or insurance ombudsman. Also watch timing: information supplied after signature fails the "in good time" requirement.
Worked example
A consumer earning a modest fixed salary asks for a loan to consolidate debts. The intermediary proposes a revolving credit whose minimum payment fits the budget but whose total cost is high. The correct analysis: the intermediary must assess suitability, explain the revolving nature and the risk of prolonged repayment, and cannot rely on the low minimum instalment alone.