6 Fair Lending Laws That Apply to All Lenders in the UK

At a Glance

There are 6 fair lending laws all lenders must follow:

• Clear communication
• Affordability checks
• Treating customers fairly
• Fair terms with no hidden fees 
• Support for borrowers who need it
• Complying with FCA regulations

In this piece, we explore each of these laws in more detail. At Salad, we’re proud to offer ethical loans that go above and beyond all the fair lending laws. For affordable, fair credit, think Salad.

Fair Lending Laws & Regulations

When you borrow money in the UK, through a bank, credit union, or online lender, there are rules in place to protect you. These fair lending rules apply to all lenders, regardless of their size or type. 

The purpose of fair lending rules is to make sure that everyone is treated fairly, honestly, and without discrimination when applying for credit. From how lenders check your ability to pay a loan, to how they handle complaints, these rules are designed to promote trust and ensure transparency throughout the lending process.

In this blog, we’ll talk about the list of fair lending laws and regulations that all UK lenders must follow. If you’re considering a loan or any form of credit, it’s important to understand your rights and the obligations lenders must follow.

1. Treating Customers Fairly Throughout the Lending Process

It’s essential to treat customers fairly at every stage of the lending process. This means lenders need to be honest, clear, and respectful from the moment you apply for credit until the loan is fully paid off.

They should explain terms in plain language, avoid pressure tactics, and make sure you understand what you’re signing up for. 

This fair treatment also includes assessing your ability to repay the loan, before offering it to you, and supporting you if you run into trouble later.

Simply put, lenders have to put your needs first and act in your best interest, rather than just focusing on making money.

2. Clear, Honest, and Transparent Communication

When it comes to fair lending in the UK, honest and transparent communication can’t be overlooked. Lenders need to give you all the important information about your loan in a way that’s easy to understand. 

This includes interest rates, fees, repayment terms, and what happens if you miss a payment. There should also be no hidden charges or confusing small print - everything needs to be clear up front. You have the right to know exactly what you’re agreeing to before signing any paperwork.

Lenders also have to be upfront if anything changes during your loan term. This kind of honest communication will help you make informed decisions and ensure you’re not misled or surprised by unexpected costs later down the line.

3. Proper Affordability and Creditworthiness Checks

Lenders should always check if you can truly afford the loan before giving it to you. This means they need to look at your income, expenses, and any existing debts to decide if the repayments will be manageable. 

It’s not just about whether you want the loan - it’s about whether you can realistically pay it back without falling into financial trouble. Such fair lending laws and regulations apply to all UK lenders, and they protect both you and the lender by reducing the risk of missed payments or long-term debt.

A responsible lender won’t approve a loan just to make a profit - they’ll make sure it’s the right fit for you. For instance, we use Open Banking to assess your current financial situation, which gives us a clearer idea of whether you can afford our loans.

4. Fair Terms and No Hidden Fees or Conditions

Lenders are required to offer clear, fair agreements with no hidden fees or confusing conditions. This is to prevent you from being caught out by extra charges or rules buried in the small print. 

All costs, like interest rates, late payment fees, and any other charges, need to be clearly explained upfront. This rule ensures that you know exactly what you’re signing up for.

Fair loan terms also mean that lenders can’t change the rules midway through your loan without good reason and proper notice. It’s all about keeping things honest and straightforward.

5. Supporting Borrowers Facing Financial Difficulty

Another fair lending law that applies to lenders is that they have to support borrowers who are struggling to repay their loans. Life can be unpredictable, and job loss, illness, or other challenges can affect your ability to keep up with payments.

In these cases, lenders need to treat you with understanding, not punishment. This could include offering a temporary payment plan, freezing interest, or giving you time to catch up.

They should listen to your situation and work with you to find a fair solution. The goal isn’t to make your situation harder, but to support you in getting back on track without added stress or pressure.

6. Complying with FCA Regulations and Industry Standards

All lenders in the UK must follow the rules set by the Financial Conduct Authority (FCA) and stick to industry standards. The FCA is the official body that regulates financial services to make sure customers are treated fairly.

Lenders need to be licensed, act responsibly, and regularly report how they operate. 

If they break these rules, they can face fines or lose their licence. They’re required to follow FCA guidelines to show they’re trustworthy and committed to doing things the right way.

For borrowers, this means more protection, greater peace of mind, and a safer borrowing experience from start to finish.

For a Safe and Fair Lending Process in the UK, Choose Salad

Needless to say, at Salad, we follow all these rules, and ensure we go above and beyond to deliver the best, most ethical lending experience. 

Now that you’re aware of which fair lending laws and regulations apply to all lenders, you might be considering looking to borrow funds online for an emergency. That’s where we can help.

At Salad, we believe everyone deserves fair financial support, without hidden barriers and regardless of their credit score. We’re committed to helping people make informed choices and build a healthier financial future, especially when life takes an unexpected turn.

Using Open Banking technology, we analyse your current financial situation and spending habits to gauge your loan affordability and provide you with the support you need. As an FCA-regulated and authorised lender, you can trust us to keep your financial data safe.