Responsible lending sounds lofty, but what does it really mean for the lender and the lender? The law defines good lending practices and acts as a strong guideline for responsible lending.
Responsible lending must be visible in all activities of a financial company from the first customer contact and marketing to the repayment of a consumer loan, including any challenges that the customer may face in repayment.
Obligation to act responsibly in granting credit
The creditor’s obligation to act responsibly is briefly defined by law as follows:
The law requires that:
(1) The lender shall market the credit clearly and in a manner which does not impair the ability of the lender to carefully assess and consider the loan.
2) The lender does not market the loan under the guise of other consumer goods, although the main purpose is to get the consumer to borrow.
3) Before concluding the actual loan agreement, the consumer always receives from the lender a clear explanation of the loan, which allows the borrower to consider whether the loan is right for his needs and situation.
(4) The lending institution shall also assist, advise and provide information in the event of any delay in the repayment of the loan or the risk of difficulty for the customer to make payments.
In addition, there is an obligation on the creditor to ensure the consumer’s creditworthiness, verify the consumer’s identity and keep this information.
The ABC has also commented on these and opened sections of the law in its own publications.
For example, accountability, advice and communication in the event of late payment may mean a written payment reminder.
Responsible lending in action
Responsible lending, for example, means that the credit granting process is exact math. Of course, when a consumer applies for a credit, he or she will be asked various questions about his or her financial situation, and possibly a history of electronic payment behavior.
It is not always the consumer’s and the creditor’s perception of their financial situation or solvency that will meet. But the lender cannot grant a loan to a client that is unlikely to survive.
In this case, the lender must act responsibly and offer the applicant a loan that is reasonable, even if it does not quite match the applicant’s wishes.
It is then up to the applicant to decide whether or not to take out the loan offered. He must also be able to reject that offer.
Responsible lending also means that the borrower is clearly and timely informed of all the facts about the loan.
If the lender’s website has to look for information such as price list, monthly installment rate, interest rate, you should consider whether the company is acting responsibly.
Similarly, when applying for a loan, the applicant must obtain the so-called advance information already at the application stage. Also, when the loan application is coming to an end, the applicant must be very clear about what is borrowing and what the contract in question contains.
Unfortunately, sometimes problems arise for some reason, because things change, unemployment can suddenly occur, illness can prevent you from working for a while, or something surprising happens.
In these situations, responsible lending means that the lender is within reach. In this case, customer service plays a key role in providing the options that are available.
The more flexible the customer service is available, the better the customer will get the help and support they need.
Good Finance will, of course, comply with the law, the regulations and the Code of Conduct for Public Authorities in all its operations.
Data security and customer identity verification
The technical means to follow a responsible lending approach is to effectively and reliably secure the customer’s identity. The customer’s identity must be verified not only at the time of applying for the loan, but also at the time when the customer makes any new withdrawals from his / her own flexible credit.
The most secure ways to identify a customer and verify their identity is through the use of their online banking identities, i.e. Good Lender, and a mobile certificate.
These are needed to even start a loan application and this is to minimize the misuse of personal information.
Some customers wonder why authentication is needed every time they log in, for example, to MyGood Financeo to check or change information. This is also to make the use of credit as safe as possible.
For the same reason, information about another person’s loan matters cannot be obtained or processed without the explicit, and usually written, permission of that person, even if the purpose is good.
Customer information on loans is confidential and cannot be disclosed to another person. Of course, the authorities are the exception.