Responsible Credit: British Bankers' Association publishes Principles of Responsible Lending MOVE TOWARDS PRINCIPLES OF RESPONSIBLE CREDIT CONTINUES - BBA ON RESPONSIBLE LENDING After Cetelem (France) and GE-Money now the British Bankers' Association has published Principles of Responsible Lending. ECRC hopes that also other banks and bankers' associations in Europe especially those like the Savingsbanks and the Coop-Banks follow this development into softlaw. It seems as if there are two contrasting views in responsible credit: one that seeks to tell the public that less credit to the poor would be better and the other that claims that better credit to the poor would do less harm to them. ECRC will discuss these attempts at the Brussels Conference in September 14, 2007 where the authors of these principles will discuss their advantages and perils. It will be asked whether such principles can replace, prepare or specify legally binding rules and what the public can expect from it in general and in individual cases where consumers are concerned. THE PRINCIPLES The Banking Code on responsible lending 03/07/2007 Responsible lending is providing credit, based on background checks and professional judgement, to people who can accommodate regular repayments without getting into financial difficulty. Before we lend you any money or increase your overdraft, we will assess whether we feel you will be able to repay it. Banks endeavour to make their decisions as transparent and as objective as possible. Credit scoring is one of the decision-making tools they use: a technique used to assess the probability that customers can and will meet their financial commitments. Credit scoring uses, where available, information from a bank's own records and may include data received from credit reference agencies. These systems help banks make decisions about opening accounts and granting credit by using statistical techniques to measure the likelihood that a customer applying for credit will be an acceptable credit risk. It can also help to accelerate the decision making process. If we offer you an overdraft, or an increase in your existing overdraft limit, we will tell you if your overdraft is repayable on demand. Borrowing on credit cards, overdrafts and unsecured loans accounted for 17 per cent of all lending to individuals in 2006. Mortgage lending accounted for the remaining 83 per cent. New lending on personal loans and overdrafts in May 2007 was nine per cent less than in May 2006. After seasonal adjustment, this fell by £54 million net. If we cannot help you, we will explain the main reason why if you ask us to. We will give you this, in writing or electronically, if you ask. Before we give you a credit limit, we will assess whether we feel you will be able to repay it. We may increase your credit limit on your credit card: You can contact us at any time if you want to reduce your credit limit or opt out of receiving credit limit increases You can ask us to increase your credit limit and we will consider this when we have made the appropriate checks Sometimes we may decide to reduce your limit. Around one quarter of credit card borrowing does not incur any interest: users simply defer payment with the cards. Spending on credit cards totalled £7.4 billion in May 2007, 3.4 per cent less than in May 2006. This indicates customers are preferring to pay up front rather than borrowing to spend. More than £6.6 billion was written off in bad debts in 2006, £5.3 billion of which was lending to individuals. ID: 39914 Author(s): UR Publication date: 09/07/07     URL(s): British Bankers Association "Responsible Lending"

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