OFT publishes mental capacity guidance

It sets out steps that the OFT expects consumer credit businesses to take with a view to:

• identifying borrowers who might have mental capacity limitations
• assisting them to understand credit agreements so they can make informed borrowing decisions
• reducing the risk that they will be granted unaffordable or clearly unsuitable credit.

The guidance focuses primarily on creditors adopting appropriate practices and procedures to assist borrowers who might not have the mental capacity to make informed decisions. These include:

• providing borrowers with clear information and explanations about credit agreements and any associated risks
• giving them adequate time to weigh up the information and explanations provided in order to better enable them to reach responsible borrowing decisions
• carrying out sufficiently stringent assessments of their ability to afford to meet repayments in a sustainable manner.

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.”