1. All assessments should involve a consideration of
the potential for the credit commitment
to adversely impact the borrower’s
financial situation
to adversely impact the borrower’s
financial situation, taking into account the
information that the creditor is aware of at the
time the credit is granted.

2. The creditor must assess if the borrower can
undertake the credit agreement in a
sustainable manner without him incurring
financial difficulties or experiencing adverse
consequences. They must show that they have
disposable income and are likely to be able to
maintain this over the course of the loan.
‘Sustainable manner’ means the borrower can
pay it back without incurring or increasing
indebtedness, without having to realise security
The OFT would not consider repayments to be
unsustainable if the borrower missed an
occasional payment. If they did, the creditor
would not be expected to extend the term of
the loan to allow for this, but would allow for
payments to be made up at a later date, but
within the original term of the loan. Also, the
creditor would not be expected to increased the
total amount payable to unsustainable levels.
Where the assessment of affordability indicatesindebtedness, without having to realise security
or assets, and without undue difficulty, and
without having to borrow further to meet the
repayments. (In the absence of changes to
personal circumstances which were
unforeseeable at the time the credit was given).
Creditors should assess affordability and
assess the risk of the credit sought being
unsustainable for the borrower in question.
Borrowers should be encouraged to undertake
their own assessment, as well as that of the
creditor.
Where the assessment of affordability indicates
that the borrower is unlikely to be able to meet
the repayments in a sustainable manner, the
credit should not be given, or the borrower
should be offered a smaller amount which is
sustainable.
In certain circumstances, (such as where there
is a short period where there will be reduced
income, but it is known when this will be
rectified), the creditor may grant credit. This
limited exception is less likely to apply where
the reduced income period is likely to span an
extended period.

3. Creditors should take account of future financial
commitments and must take reasonable steps to
obtain this information, (i.e. regular outgoings). The
creditor must request this information, but cannot
be held culpable if the information given is not
correct, but the creditor, (acting reasonably) was
not aware of this.
If the creditor is aware of a future event or
Creditors, upon request, should be able to provide
the OFT with information relating to the
practices/procedures used to assess affordability.
Any supplementary income (such as overtime or
bonuses) are not guaranteed so creditors should
exercise caution. Basic pay only is ‘guaranteed’.
When assessing expenditure, it must be taken into
account that some expenditure varies. Some
household costs differ month on month, or are
If the creditor is aware of a future event or
commitment which may impact the borrower’s
ability to make payments (such as impending
retirement, or a known end date to employment),
they must take this into account, but would not be
held responsible if this was not known at the time
that the assessment of affordability was
undertaken.
Creditors can use various types of sources of
information, (for example, records of previous
dealings, evidence of income and expenditure,
information gained from the borrower, either on the
application form or from personal contact).
Creditors can use discretion in deciding types and
sources of information relating to the practices and
procedures that they employ in assessing
affordability.
household costs differ month on month, or are
dependent upon the time of year.
Creditors who do not require documentary evidence
of income and expenditure, should ensure that
whatever means they employ is sufficient to make
the assessment. Self – certification of income, in
general is not acceptable in respect of long term
credit agreements.
The OFT accepts that the level of scrutiny required
for a small sum may be less than for a large sum,
but that sustainability is still relative to the
borrower’s financial situation.
The creditor must take into account if the borrower
is vulnerable or lacks the mental capacity to be able
to understand the information and make an
informed decision.

4. Failing to establish and implement clear and effective policies and procedures for the reasonable assessment of
affordability.
Failing to undertake a reasonable assessment of affordability in an individual case.
Failing to consider sufficient information to be able to reasonably assess information, i.e. not verifying hard copies of
income such as payslips.
Failing to undertake an assessment or using insufficient information obtained from the borrower.
Basing the credit on the value of the collateral only. The borrower must be assessed on affordability. Lending on the
property value only is unacceptable.
Failing to assess affordability at all, or granting credit if the creditor knows or reasonably suspects that it is
unsustainable.
Lending to a borrower to make a repayment on a debt. The creditor should advise the borrower to seek assistance from
a non-profit provider of free money advice.
Inappropriately encouraging borrowers to increase/roll over existing debt to unsuitable levels. Debts can be
consolidated in circumstances where the borrower’s overall financial position is not made unsustainable.consolidated in circumstances where the borrower’s overall financial position is not made unsustainable.
Encouraging the borrower to take out a loan for a higher amount than he requests, when the assessment of
affordability is known, or suspected, that repayment is unsustainable.
Failing to take reasonable, adequate steps to ensure that the information on a credit application with regard to
affordability is complete and correct. Question anything which is unclear or unrealistic.
Completing all or part of the application for credit for the borrower, unless you have their consent. In this case, he must
be given the opportunity to check that it has been completed accurately before signing the credit agreement.
Accepting an application for credit when it is known or suspected that the borrower has not been truthful in completing
the application, with regard to the assessment of affordability. If information is inconsistent or contradictory to other
available information.
Inducing or encouraging a borrower to falsify details regarding affordability.
Distorting or falsifying details relevant to an assessment of affordability, with or without the borrower’s consent.